Time Value of Money

Concept:The present value of an annuity formula: $\text{Loan} = \text{Payment} \times \text{PVIFA}(n, r)$.Explanation:Cost of TV = Rs. 25,000.Down payment = Rs. 5,000.Unpaid amount = Rs. 25,000 − Rs. 5,000 = Rs. 20,000.This Rs. 20,000 is to be paid in 4 equal annual payments at 14% interest.The present value annuity factor for 4 years at 14% is given as $P(4,0.14) = 2.91371$.So, $20,000 = \text{Payment} \times 2.91371$.Thus, each payment = $\frac{20,000}{2.91371} \approx 6864.10$.Answer:Each payment is Rs. 6864.10.