A company borrows 100,000 today at 12% nominal annual interest. the monthly payment of a 5 year loan is most nearly:

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Business

Bradley

25 June, 15:10

A company borrows 100,000 today at 12% nominal annual interest. the monthly payment of a 5 year loan is most nearly:

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Answers (1)

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Jacquelyn Costa · Answer 1

Formula for the monthly payment:

M = P * r * (1 + r) ^n / ((1 + r) ^n + 1)

where: P = $100,000 r = 0.12 : 12 = 0.01 n = 12 * 5 = 60

M = 100,000 * 0.01 * (1 + 0.01) ^60 / ((1 + 0.01) ^60 + 1) =

= 1,000 * (1.01) ^60 / ((1.01) ^60 + 1) =

= 1,000 * 1.8167 / 0.8167 = 1,000 * 2.22444 =

= $2,224.44

The monthly payment is $2,224.44.