Question

A loan of P500,000 was signed by Liza who promised to pay it at the beginning of each month for 5 years. If money is worth 12% compounded monthly, what will be the total sum paid by Liza?

Answer 1

3,604,389

Explanation:

Monthly payment P =
`(a)/([(1+r)^(n) - 1] / [r(1+r)^(n)] )`

where a = total loan amount, r = periodic rate, n = number of payment periods

a = 500,000 ; r = 0.12 ; n = (5 x 12) = 60 months

P =
`(500000)/([(1+0.12)^(60) - 1] / [0.12 (1+0.12)^(60) ] )`

P =
`(500000)/((896.597) / (107.712))`

p = 60,073.151

Total amount paid = 60073.151 x 60 = 3,604,389