question archive What payment is required at the end of each month for 5 years to repay a loan of $20 000
What payment is required at the end of each month for 5 years to repay a loan of $20 000
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What payment is required at the end of each month for 5 years to repay a loan of $20 000.00 at 6.0% compounded monthly?
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386.6560306, or 386.66
Step-by-step explanation
Use the present value annuity formula.
P = loan amount = 20,000
n = number of periods = 5 x 12 = 60
r = periodic rate = 0.06/12 = 0.005
A = periodic payment = ?
P = A x (1-(1+r)-n) / r
20,000 = A x (1-(1+0.005)-60) / 0.005
A = 20,000 / 51.72556075
A = 386.6560306, or 386.66
