Question

Heather is applying for a small business loan in the amount of $5,000 to be repaid over 18 months along carries and an annual interest rate of 3.75% what would Heather's monthly payment be for the loan

Answer 1

Apply the formula:

`PV=(PMT)/(i)(1-(1)/((1+i)^n))`

Where:

PV = loan amount = $5,000

PMT= Monthly payment = x

i = interest rate (decimal form) = 3.75/100 = 0.0375 /12 = 0.003125

n= number of months = 18

Replacing:

`5,000=(x)/(0.00375)(1-(1)/((1+0.00375)^(18)))`

Solve for x

`5,000=(x)/(0.00375)\text{ (0.065)}`
`(5000)/(0.065)=(x)/(0.00375)`
`76,740.9466=\text{ x/0.00375}`

`76,740.9466(0.00375)=x`
`x=286.10`