Answer:
Monthly payment: 460.41 dollars
Effective rate: 4.07%
Explanation:
we will calculate the PTM of an annuity of 25,000 over 5 year at 4%
[tex]PV \div \frac{1-(1+r)^{-time} }{rate} = C\\[/tex]
PV $25,000.00
time 60
rate 0.003333333
[tex]25000 \div \frac{1-(1+0.003333)^{-60} }{0.003333} = C\\[/tex]
C $ 460.413
Now we need to know the effective rate, which is the same as 4% compounding monthly:
[tex](1+0.04/12)^{60} = (1+ r_e)^{5}\\r_e = \sqrt[5]{(1+0.04/12)^{60}} - 1[/tex]
effective rate = 0.040741543 = 4.07%
