Question

Jane takes out a loan for $100,000.00 over 10 years

and agrees to pay interest only at an annual rate of
8%. What will her monthly payment be?

Answer 1

$1799.10

Explanation:

Each year, the amount of money in the account is increased by 8%. This is the same as multiplying by 1.08 each year.

For 10 years, you multiply the original $100,000 by 1.08 a total of 10 times.

This tends to be simplified to:

`100,000 * 1.08^(10)`

This gives $215892.4997.

This is paid back over 10 years, which is 10 x 12 months, or 120 months.

Divide the $215892.4997 by 120 to get the monthly payment of:

$1799.10 (round to 2 decimal places as it is a currency)