SOLUTION: An internet shop obtains a loan of 150,000 Php from a lending company based on a simple interest rate of 10.25% payable in two years. 1.) What is the maturity value of the loan?

Question 1187677: An internet shop obtains a loan of 150,000 Php from a lending company based on a simple interest rate of 10.25% payable in two years.
1.) What is the maturity value of the loan?
2.) What is the monthly amortization if the shop wishes to pay the loan through monthly installments?
Answer by Theo(13342) (Show Source): You can put this solution on YOUR website!
simple interest formula is i = p * r * n
i is the interest
p is the principle
r is the interest rate per time period
n is the number of time periods.

if you want the future value of the loan, then the formula becomes:

f = p + p * r * n

f is the future value
p is the principal
r is the interest rate per time period
n is the number of time periods.

note that the future value of the loan is the same as the maturity value of the loan.

the loan is 150,000.
the interest rate is 10.25% per year.
the term of the loan is 2 years.

the maturity value of the loan will be:

p + p * r * n = 150,000 + 150,000 * .1025 * 2 = 180,750.

if the loan is to be paid through monthly payments, then the monthly payments will be 180,750 / (2 * 12) = 7,531.25.

that's the maturity value of the loan divided by the number of months of the loan.

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