Question

You have obtained a loan of $250,000 to purchase a home. What are the monthly payments if the APR is 3.75% for 30 years (payments will be made monthly for the next 30 years)

Answer 1

Here loan amount is $250,000. This is the single loan amount at present period and we need to find monthly installment and 30 years =360 months. Annual percentage rate = 3.75% and monthly it will be 3.75/12 = 0.3125%. So we can write the problem as 250,000( A/P, 0.3125%, 360) = 250,000* [i(1+i) ^n/(1+i)^n - 1] = 250,000*[{0.003125(1.003125)^360}/{(1.003125)^360 - 1}] = 250,000*0.00463116 = 1157.79 = 1158(approx). So monthly installment of the loan will be $1158 (approx) .