A loan for $2000 is paid back over a period of 5 years. The interest rate is 5% compounded monthly. Determine the monthly payment.
A) 37.74
B) 43.90
C) 41.76
D) 42.18
69
i = .05/12 = .0041666.. (keep it in your calculator, don't round off)
n = 60
paym( 1 - (1.04166...)^-60)/ ..041666... = 2000
solve for paym
let me know what you got.
A? It wasn’t exact number but it was the closest
correct, if you use all the digits that you can hold in your calculator's memory, you will get it exactly to the cent.
To determine the monthly payment for a loan, you can use the formula for calculating the monthly payment on a fixed-rate loan:
M = P * (r * (1 + r)^n) / ((1 + r)^n - 1)
Where:
M = Monthly payment
P = Principal amount (loan amount)
r = Monthly interest rate (annual interest rate divided by 12)
n = Total number of payments (number of years multiplied by 12)
In this case, the principal amount (P) is $2000, the annual interest rate is 5%, compounded monthly, so the monthly interest rate (r) would be 5% / 12 = 0.05 / 12 = 0.00417, and the total number of payments (n) is 5 years * 12 months/year = 60.
To find the monthly payment (M), substitute these values into the formula:
M = 2000 * (0.00417 * (1 + 0.00417)^60) / ((1 + 0.00417)^60 - 1)
Calculating this expression will give you the monthly payment for the loan.
Using a calculator, the monthly payment comes to approximately $37.74.
Therefore, the correct answer is option A) $37.74.