Question

Grace takes out a 48-month loan for $20,000. At a 1.5% interest rate, what is her monthly payment? Amortization formula: $385 $430 $444 $480

Answer 1

When Grace takes out a 48-month loan for $20,000 at 1.5% interest rate, her monthly payment is B) $430.

We can compute the monthly payment using the payment formula:

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

Where P = the periodic payment

r = rate per period

PV = Present value of the loan

n = the number of periods.

Using an Online Finance Calculator, the results are as follows:

N (# of periods) = 48 months

I/Y (Interest per year) = 1.5%

PV (Present Value) = $20,000

FV (Future Value) = $0

Results:

PMT (Monthly Payments) = $429.55 ≈ $430.

Sum of all periodic payments = $20,618.49

Total Interest = $618.49