Petty Marine Co. has a long term plan to expand to a second location that’s actu
ID: 3195013 • Letter: P
Question
Petty Marine Co. has a long term plan to expand to a second location that’s actually near some water, so they want to start a monthly annuity to save $150,000 in capital over 10 years. The best rate they can find is 13%. Find the monthly payment. Round to the nearest cent. Petty Marine Co. has a long term plan to expand to a second location that’s actually near some water, so they want to start a monthly annuity to save $150,000 in capital over 10 years. The best rate they can find is 13%. Find the monthly payment. Round to the nearest cent.Explanation / Answer
Future value of annuity formula is
FV = P { [(1 + r)n - 1] / r }
Where FV = future value = 150000
P is periodic payment (Monthly)
r is rate of interest per period = 0.13 / 12
n = number of periods = 10 * 12 = 120
Putting all these values in above formula we get,
150000 = P { [(1 + 0.13/12)120 - 1 ] / 0.13/12 }
150000 = P { 244.0369}
P = 150000 / 244.0369
P = 614.66
Monthly payment = $614.66