Question

A loan of $105,487.80 is to be amortized over a 10-year term at 6% interest compounded monthly with monthly payments and a $20,000 balloon payment at the end of the term. Calculate the monthly payment.

The monthly payment is $
(Do not round until the final answer. Then round to two decimal places as needed.)

Answer 1

$1049.09

Step-by-step explanation:

The present value of the balloon payment is ...

$20,000/(1 +.06/12)^(12·10)) = $10,992.65

So, the effective amount of the loan is ...

$105,487.80 -10,992.65 = $94,495.15

The amortization formula gives the payment as ...

A = P(r/n)/(1 -(1 +r/n)^(-nt)) = $94,495.15(.06/12)/(1 -(1 +.06/12)^(-12·10))

= $94,495.15(.005)/0.450367 = $1049.09

The monthly payment is $1049.09.