Answer:r = (1 + 0.05/4)^(4/12) - 1 = 0.012308
n = 7 * 12 = 84
PMT = $5,559.91
Explanation: To calculate the periodic payments PMT on a loan or mortgage, you can use the formula for fixed monthly mortgage repayment calculation which is based on the annuity formula. The formula is mathematically represented as:
Fixed Monthly Mortgage Repayment Calculation = P * r * (1 + r)^n / [ (1 + r)^n – 1]
where P = Outstanding loan amount, r = Effective monthly interest rate, n = Total number of periods / months 1.
For the given loan of 400,000borrowedat5, we can calculate the effective monthly interest rate as follows:
r = (1 + 0.05/4)^(4/12) - 1 = 0.012308
n = 7 * 12 = 84
PMT = $5,559.91 2.
Therefore, the periodic payments PMT on the given loan or mortgage is $5,559.91.