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
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I calculated the effective interest ra
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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):
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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.
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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)
