Solution: What is her yearly amortization if all payments are to be made at the beginning of each year?

A housewife bought a brand new washing machine costing P12,000 if paid in cash. However, she can purchase it on installment basis to be paid within 5 years.

What is her yearly amortization if all payments are to be made at the beginning of each year?

Problem Statement:

A housewife bought a brand new washing machine costing P12,000 if paid in cash. However, she can purchase it on installment basis to be paid within 5 years. If money is worth 8% compounded annually, what is her yearly amortization if all payments are to be made at the beginning of each year?

  • A. P2,617.65
  • B. P2,782.93
  • C. P2,890.13
  • D. P2,400.00

Problem Answer:

The yearly amortization if all payments are to be made at the beginning of each year is P2,400.00.

Solution:

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Shouldn't we use the formula for DUE ANNUITY since payments are to be made at the BEGINNING of each year? Therefore the answer should be 2,782.85???
Just clarifying.

The formula used in the solution is Annuity Due.

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