An example is a car purchase where you might pay $3,500 down and borrow $31,000 towards...
An example is a car purchase where you might pay $3,500 down and borrow $31,000 towards a $34,500 car. If the annual interest rate is 5.45%, you will be making 60 monthly payments and if these payments completely pay off the loan so that no money is due at the end of these payments, what would be the amount of your monthly payment? Assume that the payment is made at the end of each month. Include the equation you used to calculate your answer.
Use the =PMT Excel function to solve this problem.
Homework Answers
Loan = Amount borrowed = Present value = pv = $31000
As payments are made monthly
Monthly rate = rate = Annual interest rate / 12 = 5.45% /12
No of monthly payments = nper = 60
Amount of loan due at end of 60 months = Future value = fv = 0
We can find the monthly payment of the loan using PMT function in excel
Formula to be used in excel: =PMT(rate,nper,-pv,fv,type)
In the formula type = 0 because payments are made at end of each month
Using PMT function in excel, we get monthly payment of loan = $591.42
Hence Monthly loan payment = $591.42
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