SOLUTION: What monthly payment is required to amortize a loan of $50,000 over 10 years if interest at the rate of 6%/year is charged on the unpaid balance and interest calculations are made
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Question 1200913: What monthly payment is required to amortize a loan of $50,000 over 10 years if interest at the rate of 6%/year is charged on the unpaid balance and interest calculations are made at the end of each month? (Round your answer to the nearest cent.) Found 4 solutions by mananth, MathTherapy, math_tutor2020, ikleyn:Answer by mananth(16946) (Show Source):
You can put this solution on YOUR website! We are paying interest on the unpaid balance on a regular basis the formula needed is given by
P = payment amount
A = amount financed = 50000
r = decimal interest rate adjusted for periodicity 6% over 10 years
0.006 /month
n = total number of payments made 10 years 12 months 120 months
What monthly payment is required to amortize a loan of $50,000 over 10 years if interest at the rate of 6%/year is charged on the unpaid balance and interest calculations are made at the end of each month? (Round your answer to the nearest cent.)
Correct answer: $555.10
The formula to use is
P = (L*i)/( 1-(1+i)^(-n) )
where,
P = monthly payment
L = loan amount
i = monthly interest rate in decimal form
n = number of months
In this case
L = 50000
i = 0.06/12 = 0.005
n = 10*12 = 120 months
Then,
P = (L*i)/( 1-(1+i)^(-n) )
P = (50000*0.005)/( 1-(1+0.005)^(-120) )
P = 555.102509708256
P = 555.10
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