Question 1181667: Three friends buy a second-hand equipment that costs PhP 120,000. They give a downpayment of PhP 40,000 and agree to settle the balance in 24 monthly payments. If the interest rate is 6% converted monthly, find the payments due at the end of each month.
Answer by CPhill(1959)   (Show Source):
You can put this solution on YOUR website! Here's how to calculate the monthly payments:
1. **Calculate the Balance:**
* Balance = Total cost - Down payment
* Balance = PhP 120,000 - PhP 40,000 = PhP 80,000
2. **Identify the Given Information:**
* Present Value (PV) = PhP 80,000 (the balance)
* Number of payments (n) = 24 months
* Interest rate per month (i) = 6% per year / 12 months = 0.06 / 12 = 0.005
3. **Use the Loan Payment Formula:**
The formula for calculating the monthly payment (PMT) on a loan is:
PMT = PV * [i * (1 + i)^n] / [(1 + i)^n - 1]
4. **Substitute and Calculate:**
PMT = 80000 * [0.005 * (1 + 0.005)^24] / [(1 + 0.005)^24 - 1]
PMT = 80000 * [0.005 * (1.005)^24] / [(1.005)^24 - 1]
PMT = 80000 * [0.005 * 1.12716] / [1.12716 - 1]
PMT = 80000 * [0.0056358] / [0.12716]
PMT = 80000 * 0.04432
PMT ≈ PhP 3,545.60
Therefore, the monthly payment due at the end of each month is approximately PhP 3,545.60.
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