PLZZZ.. Help I just don't understand how to calculate this
A landlord wants to acquire an additional apartment building for $250,000. The new building contains eight apartment units, which will each rent for $500 per month. The bank is willing to loan the landlord the money for a long-term, 30-year loan at a 5.5 percent interest rate. Calculate the monthly payment, and explain whether taking this loan for the new building is a smart business decision.
Ms Sue used the concept of simple interest.
This is a longterm annuity type question and has to be done with compound interest.
i = .055/12 = .0045833.... , n = 12(30) = 360
let the monthly payment be P
250000 = P( 1 - 1.00458333...^-360)/.00458333..
P = 1419.47
I= PRT
250,000 * 0.05 * 30
I = 375,000
250,000 + 375,000 = 625,000
625,000 / 360 = 1,736.11 monthly payment
Compare the monthly payment with the amount of rent he expects to receive each month.