Annuity = Regularly recurring amount

PV = Present Value

i = Interest Rate

n = Number of Periods

Amortizable determines the amount that must be regularly repaid for a loan over a certain period at a certain interest rate.

A company wants to borrow 50,000 Eur from the bank at an annual interest rate of 6%. The loan should be repaid over 4 years with regular annual payments. How much will the regular annual payment be?

We use the formula given above:

annuity = 50,000 * (0.06 / (1 - (1 + 0.06)^4))

annuity = 14,429.57

The annual payment is therefore 14,429.57 Eur.

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