SOLUTION: a farmer needs $250 000 to purchase a 10-ton trailer. The bank approves the loan for the full amount. The interest rate is 18% per year, compounded monthly and the loan has to b

Question 1093748: a farmer needs $250 000 to purchase a 10-ton trailer. The bank approves the loan for the full amount. The interest rate is 18% per year, compounded monthly and the loan has to be paid off in 5 years time. What is the farmers minimum monthly payment?
Answer by addingup(3677) (Show Source): You can put this solution on YOUR website!
P = (r(PV))/(1-(1+r)^-n
so in this formula:
P = the monthly payment, which we are going to find.
PV is the present value, 250000
r is the rate per period, 0.18/12 = 0.015
n is the number of periods, in this case 12 x 5 = 60
Let's put it all together:
(0.015(250000))/(1-(1+0.015)^-60)
3750/0.59 = 6355.93 is the minimum monthly payment

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