SOLUTION: I am given the interest rate (.25%), the amortization - yearly (10) and the loan amount ($25,000). How do I calculate the monthly payment? I calculated the effective interest ra

Question 958620: I am given the interest rate (.25%), the amortization - yearly (10) and the loan amount ($25,000). How do I calculate the monthly payment?
I calculated the effective interest rate by .0025/12= 2.0833 E^-4. I don't how to use that.
where did I go wrong?
(I submitted this question earlier with an incorrect interest rate. I had said it was 25%, but it's .25%.
Answer by addingup(3677) (Show Source): You can put this solution on YOUR website!
It cannot be 0.25% per year.. If the 0.25% is correct, then it is the MONTHLY rate, which adds up to 3% per year. Could it be 2.5% per year?
Here is an example you can follow once you clarify the interest rate issue, I will use 2.5%/year (0.025):
-------------------
Step 1 - Monthly Rate (precisely, banker-style)
Monthly rate =
Monthly rate=
Monthly rate= ~0.0020598
NOTE: One of the most common mistakes is to simply divide annual rate by 12 to get monthly rate. However, you are not a banker. If you don't need to be THAT precise, then just take .025/12= 0.0021.
--------------------
Step 2 - Find monthly payment:
A = monthly payment amount
P = loan amount (25,000)
i = monthly interest rate (the one we figured out above, 0.0020598)
n = total number of payments (10 years x 12 months= 120 payments)

RELATED QUESTIONS
I am given the interest rate (.25), the amortization - yearly (10) and the loan amount... (answered by macston)

Andrew borrowed PhP 25,000.00 and agrees to repay the loan by level monthly installments (answered by Theo)

An internet shop obtains a loan of 150,000 Php from a lending company based on a simple... (answered by Theo)

Please I need help with the following question: * Determine the annual payment on a... (answered by solver91311)

How do I calculate the following......Kate has bought a house and managed to secure a... (answered by Theo)

loan amount 150 000 pesos payable 12 months in 10 percent interest per annum how is my... (answered by Theo)

Suppose the monthly amortization for a loan of a certain company is 1,000,000.00 Php with (answered by Theo)

Calculate the amount financed, the finance charge, and the monthly payments (in $) for... (answered by Theo)

Determine the annual payment on a $15,000 loan that is to be amortized over a four-year... (answered by Theo)