Final answer:
The monthly payment to pay off a $100,000 loan at a 4% interest rate over years is approximately $1,852.28.
Explanation:
To calculate the monthly payment for a loan, you can use the formula for an amortizing loan, which involves the principal amount, interest rate, and loan term. For this scenario, the loan amount is $100,000 with a 4% interest rate. Using a loan payment calculator or the formula for monthly payments (PMT), which incorporates the loan amount, interest rate, and loan term, the calculated monthly payment comes to around $1,852.28. This figure is reached by dividing the loan amount by the present value annuity factor, considering the interest rate and loan term, resulting in the fixed monthly payment required to fully amortize the loan over the specified period.
The formula used to determine the monthly payment involves both the principal amount and the interest rate, ensuring that both elements are gradually paid off over the loan term. In this case, a $100,000 loan at a 4% interest rate paid over years requires a fixed monthly payment of approximately $1,852.28 to settle the loan completely by the end of the term.
Loan calculations are essential in financial planning to understand the financial obligations and ensure a feasible repayment schedule. Understanding the monthly payment helps individuals budget and plan their finances accordingly to manage their debt effectively. Learning to calculate loan payments empowers individuals to make informed financial decisions.