Question

Joe takes out a loan for $19,000. He will pay the loan back monthly. The interest rate is 7.6% per year and the length of the loan is 4.5 years. TEKS 8.12(A), 8.12(B) 1. Determine how many payments need to be made. Explain.

Answer 1

54 monthly payments

Explanation:

the total number of payments = 4.5 years x 12 payments per year = 54 monthly payments

each monthly payment = loan / PV annuity factor

• loan = $19,000
• PV annuity factor, 54 periods, 0.6123%) = 45.6139

monthly payment = $19,000 / 45.6139 = $416.54