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March 29, 2017

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How would I calculate this problem. plz help I don't know how to...

An online store that has been successfully growing on its initial angel investment and revenues wants to invest $5 million to expand the business. The bank is willing to lend the business this money at a 10 percent interest rate over an eight-year term. Calculate the monthly payment, and explain what the business must be able to do with this money in order for this to be a smart business decision.

  • Math:Calculating Investment - ,

    P(1+ r/n)^nt

    t = 8
    Monthly n = 12

    rate = 10%

  • Math:Calculating Investment - ,

    thank you so much!

  • Math:Calculating Investment - ,

    The above formula gives the amount of compounded (monthly) interest earned over an 8-year period, but does not provide the payment needed to amortize the loan.

    That formula for monthly payment m is

    m = Pr/(1 - (1+r)^-n)

    In this case, we have

    m = 5000000(.10/12)/(1 - (1+.10/12)^(-12*8))
    = 75,870.82

  • Math:Calculating Investment - ,

    thank you! ,Steve

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