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Which formula would you use to solve for the payment required for a car loan if you know the interest rate, length of the loan, and the borrowed amount? Explain.
To answer for k when the known values are n, PVA and PMT, start with the current value of an annuity formula as follows:
Present Value of an Annuity Formula Table Method
PVA = PMT(PVIFA k, n)
Next, rearrange terms and solve for (PVIFA k, n) as follows
PVA / PMT = (PVIFA k, n)
At present refer to the PVIFA values in the text, you know n, thus find the n row equivalent to the number of periods in your problem on the left hand side of the table. You have as well determined the PVIFA, thus move across the n row until you find or come close to the value of PVIFA that you have solved for. The percent column in which the value is placed is the interest rate.
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