What is the monthly debt service payment on Marco's loan if Enrique lends him $15,000 for four years at 8% interest?
To calculate the monthly debt service payment on Marco's loan, we need to use the formula for calculating the monthly payment on a fixed-rate loan. The formula is:
P = (r * A) / (1 - (1 + r)^(-n))
Where:
P = monthly payment
r = monthly interest rate (annual interest rate divided by 12)
A = loan amount
n = number of months
In this case:
A = $15,000 (loan amount)
r = 8% interest rate per year (monthly interest rate = 8% / 12)
n = 4 years * 12 months/year = 48 months
Let's plug in the values and calculate:
r = 8% / 12 = 0.08 / 12 = 0.0067 (monthly interest rate)
n = 48 (number of months)
A = $15,000 (loan amount)
P = (0.0067 * 15000) / (1 - (1 + 0.0067)^(-48))
P ≈ $368.16
Therefore, the monthly debt service payment for Marco's loan would be approximately $368.16.