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You are thinking about buying a piece of art that costs $ 20 comma 000. The art dealer is proposing the following​ deal: He will lend you the​ money, and you will repay the loan by making the same payment every two years for the next 30 years​ (i.e., a total of 15 ​payments). If the interest rate is 7 % per​ year, how much will you have to pay every two​ years?

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Answer:

Explanation:

This is an annuity question. You can solve this using a financial calculator with the following inputs;

Present value ; PV = -20,000

Duration; N = 15 payments

2 year interest rate; I = [(1.07)^2 ] -1 = 14.49%

One-time future cashflow; FV = 0

Then compute recurring payment ; CPT PMT = $3,336.28

Therefore, you'll pay $3,336.28 every 2 years

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