Question

Sanam has bought a property for $120,000 down payment and quarterly payments of $2100 at the end of every quarter for 15 years. Find the purchase price of her property if interest rate is 4% p.a. compounding quarterly

Answer 1

The purchase price is computed as shown below:

= Down payment + quarterly payment x [ (1 – 1 / (1 + r)ⁿ) / r ]

r will be as follows:

= 4% / 4 (Because interest rate as mentioned in the question gets quarterly compounded, hence divided by 4)

= 1%

n will be as follows:

= 15 x 4 ((Because interest rate as mentioned in the question gets quarterly compounded, hence multiplied by 4)

= 60

So, the amount will be as follows:

= $ 120,000 + $ 2100 x [ (1 - 1 / (1 + 0.01)⁶⁰ ) / 0.01 ]

= $ 120,000 + $ 2100 x 44.95503841

= $ 214,405.58 Approximately