Question

Calculate the monthly payment by using the loan amortization table:

Loan   $8,500
Down Payment   $2,000
Time   48 months
Rate   10.5%

Answer 1

Loan amount =8500

(-)Down Payment=2000

Remaining Loan amount=6500 (i.e.8500-2000)

Installment amount can be calculated using present value of annuity method:

Annuity amount = Loan amount /PV factor of annuity for 48 periods at 10.5%

PV factor of annuity= [(1+.105)^{^48}-1] / [(1+.105)^{^48}*.105]

PV Factor of annuity=9.445

Annuity=6500/9.44485

Annuity=688.206

Hence Monthly payment=688.206

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