Question

Determine the payment to amortize the debt. (Round your answer to the nearest cent.) Monthly payments on $170,000 at 4% for 25 years.

Answer 1

The payment would be $ 897.32.

Explanation:

Since, the monthly payment of a loan is,

`P=(PV(r))/(1-(1+r)^(-n))`

Where, PV is the present value of the loan,

r is the monthly rate,

n is the total number of months,

Here,

PV = $170,000,

Annual rate = 4 % = 0.04

So, the monthly rate, r =
`(0.04)/(12)=(1)/(300)` ( 1 year = 12 months )

Time in years = 25,

So, the number of months, n = 12 × 25 = 300

Hence, the monthly payment of the debt would be,

`P=(170000((1)/(300)))/(1-(1+(1)/(300))^(-300))`

`=897.322628506`

`\approx \$ 897.32`