Question

You just obtained a loan of $16,700 with monthly payments for four years at 6.35 percent interest, compounded monthly. What is the amount of each payment?

Answer 1

Answer:

$ 394.87

Explanation:

Amount payment can be calculated using the formula

c ( amount payment monthly) = rP(1+r)^n / (1+r)^n - 1

where r is the interest rate  per month = 6.35 / 12 = 0.529 / 100 = 0.00529

n = number of months = 4 × 12 = 48 months

P is the initial amount = $16,700

substitute the values into the equation

c =  0.00529 × $16,700 ( 1 + 0.00529) ⁴⁸ / (( 1 + 0.00529)⁴⁸ - 1) =  $ 394.87