Question

After graduating law school Amy has to start repaying her $110,000 in loans. Assuming the annual interest rate is 7.5% over a 20 year repayment period, what will be the monthly loan payments?

a. $886.15
b. $458.34
c. $899.18
d. $906.93

Answer 1

monthly payment= $886.15

Step-by-step explanation:

Giving the following information:

PV= $110,000

i= 0.075/12= 0.00625

n= 12*20= 240

To calculate the monthly payment, we need to use the following formula:

monthly payment= (PV*i) / [1 - (1+i)^(-n)]

monthly payment= (110,000*0.00625) / [1 - (1.00625^-240)]

monthly payment= $886.15