A loan of $8,400 was received at a rate of 9% compounded quarterly. Payments will be...
A loan of $8,400 was received at a rate of 9% compounded quarterly. Payments will be made at the end of each month for 5 years. Determine the size of the payments. Simple interest is paid for part of a period.
Homework Answers
Annual Rate = 9%, Compounding Frequency : Quarterly
Applicable Quarterly Rate = 9/4 = 2.25 %
Applicable Monthly Rate = (1.0225)^(1/4) - 1 = 0.00558 or 0.558 %
Loan = $ 8400 and Tenure = 5 years or ( 5 x 12) = 60 months
Let the monthly repayments be $ k
Therefore, 8400 = k x (1/0.00558) x [1-{1/(1.00558)^(60)}]
8400 = k x 50.8723
k = 8400 / 50.8723 = $ 165.119 ~ $ 165.12
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