Question

a 5-year $10,000 loan requiring monthly payments at a fixed rate of 9% is amortized into five-year monthly payments. How much is the monthly payment?

Answer 1

Monthly Loan Payment

Loan Amount (P) = $10,000

Monthly interest rate (n) = 0.75% per month [9.00% / 12 Months]

Number of period (n) = 60 Months [5 Years x 12 Months]

Therefore, the Monthly Loan Payment = [P x {r (1 + r)n} ] / [(1 + r)n – 1]

= [$10,000 x {0.0075 x (1 + 0.0075)60}] / [(1 + 0.0075)60 – 1]

= [$10,000 x {0.0075 x 1.565681027}] / [1.565681027 – 1]

= [$10,000 x 0.011742608] / 0.565681027

= $117.43 / 0.565681027

= $207.58 per month

“Hence, the Monthly loan payment will be $207.58”