Q: A couple borrow rs.10,000 to buy a car. The loan agreement specifies that monthly payement are to be made for 4 years. The annual interst rate is 10%. Determine the monthly payement?
i=interest rate per period(assumed compounded each period)
P=monthly payment
n=number of payments
A=amount borrowed
A(1+i)^n=P((1+i)^n - 1)/(i)
For
i=0.1/12=1/120
A=10000
n=48
Monthly Payment, P
=A(1+i)^n*(i) / ((1+i)^n - 1)
=10000(121/120)^48*(1/120) / ((121/120)^48-1)
=10000 * 0.025363
=253.63
THNX!!!
You're welcome!
To determine the monthly payment, we need to use the formula for calculating the monthly payment on a loan:
M = P * r * (1+r)^n / ((1+r)^n - 1)
Where:
M = Monthly payment
P = Principal amount (loan amount)
r = Monthly interest rate
n = Number of payments (in months)
First, let's convert the annual interest rate to a monthly interest rate. Divide the annual interest rate by 12 (since there are 12 months in a year):
10% / 12 = 0.10 / 12 = 0.00833
Next, calculate the number of payments. In this case, since the loan is for 4 years, there will be 4 years * 12 months = 48 payments.
Now we can plug in the values into the formula:
M = 10,000 * 0.00833 * (1+0.00833)^48 / ((1+0.00833)^48 - 1)
Using a calculator or spreadsheet, evaluate this expression to get the monthly payment amount.
The resulting monthly payment will be the answer to your question.