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Unformatted text preview: ing PVA5 $2,000 and PMT $514.14 into Equation 4.24
and rearranging the equation to solve for PVIFAi,5yrs, we get
PMT 2000 PV PVA5
$514.14 3.890 (4.26) The interest rate for 5 years associated with the annuity factor closest to 3.890 in
Table A–4 is 9%. Therefore, the interest rate on the loan is approximately (to the
nearest whole percent) 9%. N 5 CPT
9.00 Calculator Use (Note: Most calculators require either the PMT or the PV value
to be input as a negative number in order to calculate an unknown interest rate
on an equal-payment loan. That approach is used here.) Using the inputs shown
at the left, you will find the interest rate to be 9.00%, which is consistent with the
value found using Table A–4. 166 PART 2 Important Financial Concepts Spreadsheet Use The interest or growth rate for the annuity also can be calculated as shown on the following Excel spreadsheet. Finding an Unknown Number of Periods
Sometimes it is necessary to calculate the number of time periods needed to generate a given amount of cash flow from an initial amount. Here we briefly consider
this calculation for both single am...
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