Using the monthly payment formula below, calculate the monthly payment for a 10-year $50,000 amortization loan at 4.5%.
M=P[r(1+r)n(1+r)n−1]
M = Monthly payment amount
P = original Principal amount
r = monthly interest Rate (divide annual rate by 12)
n = total Number of monthly payments (# of years x 12)
a. M=$1,518.50
b. M = $497.80
c. M = $750.00
d. M = $518.50
To calculate the monthly payment, we need to plug the values into the formula:
P = $50,000
r = 4.5% / 12 = 0.00375
n = 10 years x 12 months = 120 months
M = $50,000[0.00375(1+0.00375)^120] / [((1+0.00375)^120)-1]
M = $50,000[0.00375(1.00375)^120] / [(1.00375)^120 - 1]
M = $50,000[0.00375(2.498622)] / [(2.498622) - 1]
M = $50,000[0.009369] / [1.498622]
M = $468.45
Therefore, the correct answer is not listed. The monthly payment for a 10-year $50,000 amortization loan at 4.5% is $468.45.