Question

Find the payment necessary to amortize the loan. Round the answer to the nearest cent. $12,100; 12% compounded monthly; 48 monthly payments

a. $313,57
b. $318,64
c. $1458,32
d. $318.87

Answer 1

(b) $318.64

Explanation:

You want the monthly payment for a 48-month loan of $12,100 at 12%.

Payment

The amortization formula tells you the payment is ...

A = P(r/12)/(1 -(1 +r/12)^-n)

where r is the annual interest rate, n is the number of monthly payments, and P is the principal borrowed.

A = $12,100(0.12/12)/(1 -(1 +0.12/12)^-48) ≈ $318.64

The loan payment necessary is $318.64.

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