Loan with equal annual repayments

[nokia8650]

I was undertaking the following problem:

A man takes out a 5 year loan for $10,000 with an annual interest of 8% with equal annual repayments. How much must be paid each year?

I'm stuck as to where and how to start. Is there are particular equation which I should be using?

Thanks

 

[HallsofIvy]

The first time you posted this, it was deleted because you had not shown any work. Now you have reposted, still showing no work!

 

[nokia8650]

Sorry, I really don't know where to start; would it be possible for you to give me a nudge in the right direction so that i can work it through?

 

[HallsofIvy]

Well, how about just doing the algebra? He borrowed $10000 at 8% interest so his interest for the first year is (.08)(10000)= $800. At the end of the first year he owes $10800. If his annual payment is P, after that payment, he still owes 10800- P.

How much will the interest be for the second year? Add that to the 10800-P he owed to get how much he owes before his payment. How much will he owe after his annual payment?

Now do that for the third, fourth, and fifth years. Set the amount still owed after his fifth annual payment to 0 and solve for P.