Question

Find the periodic payment R of a loan with a present value PV of $18,000 and an annual interest rate r 5.4% for a term of t 6 years, with payments made and interest charged 12 times per year.

Answer 1

$293.24

Explanation:

The amortization formula is good for this. (So are any number of financial calculators or apps.)

R = PV(r/n)/(1 -(1 +r/n)^(-nt))

for present value PV, annual interest rate r, term t in years, and n the number of compoundings per year.

R = $18,000(0.054/12)/(1 -(1 +0.054/12)^(-12·6)) ≈ $293.24

The periodic payment is $293.24.