Annuity Payment

Not sure what your question is here but I'll make up one and try to answer. What you are trying to determine is how much money you can take each year so that the value after five years is zero. Let the amount be X. After the first year, you have $5000 + $400 (the interest) - X. Each year you do the same thing. I could derive the formula for you but you should just use this calculator instead. This is also the exact same formula for figuring out a car payment. If you buy a $5000 car at 8% interest for five years, your payment would be $1252/year.

Got it...Thank you..

Engineer, I'm not sure your answer is correct. If that $5000 is paid in monthly installments, the interest earned will not be $400. When buying a car for $5,000 to be paid over five years at 8% interest, the monthly payment will be $102.05 or $1,224.60/year.

The problem specified annual payments but you are right that the value is slightly different if you compound monthly.

You are correct as the problem is stated; as annual. However, in real life, annuity and car payments are monthly.

In late breaking market news a perpetuity has just been valued at 1 upon i up front.