Question

A loan of 35,400 is to be repaid with monthly payments for 5 years at 6% interest compounded monthly. Calculate the monthly payment.

The payment size is$___ (Round to the nearest cent as needed.)

Answer 1

$684.38

Explanation:

A = Pi / (1 − 1/(1 + i)ⁿ)

where A is the annuity (monthly payment),

P is the present value (the loan),

i is the interest rate per compounding,

and n is the number of compoundings.

P = 35400

i = 0.06 / 12 = 0.005

n = 5 × 12 = 60

A = (35400) (0.005) / (1 − 1/(1 + 0.005)⁶⁰)

A = 684.38