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End of Year Payments

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I would like to see how to solve the following and the formulas used:

A company wants to borrow $200,000 from a bank and repay in five equal annual end-of-year payments, including interest. If the bank wants to earn a 10% rate of return on the loan, what should the payment be? Ignore taxes and default risk.

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Solution Summary

The solution explains how to calculate the equated payments to repay a loan.

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We are to find the out the equated yearly installments. The present value of the installments will be the amount borrowed. The time period is 5 years and the interest rate is 10%.

The equated installments are an annuity. In effect ...

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