Question

Calculate the monthly payment for a loan of $7,500 with an 11% interest rate compounded monthly over a period of 5 years.

Answer 1

The answer is $163.07

Explanation:

To find the monthly payment:

`i = (0.11)/(12) = 0.0091`

Time = 5 years

5 x 12 = 60

Discount factor

`D = \frac{1-(1 + i) -^(n)}i`

`D = (1 - (1+ 0.009)-^(60) )/(0.009) \\`

`D = (0.421)/(0.009) = 46.77`

Monthly payment

`(7500)/(46.77) = $163.07`

Answer 2

Option b - $163.07

Explanation:

Given : A loan of $7,500 with an 11% interest rate compounded monthly over a period of 5 years.

To find : Monthly payment

Solution : Formula to find monthly payment

Monthly Payment = Amount / Discount factor

Discount factor

where ,

Amount = $7500

Rate= 11%=0.11

Time = 5 years

Now, put i and n in Discount factor ,

Monthly payment,

Therefore, Option b is correct monthly payment = $163.07