Question

Mobile Health needs to replace its mobile medical unit to continue providing diagnostic services and preventative medicine to city residents. The van costs $120,000, and a bank is willing to lend the nonprofit the money at a 6% interest rate for 5 years. Payments are due at the end of each month, and interest is compounded monthly. How much should you budget for the monthly payment?

Answer 1

In this case we need to find the EMI.

Interest rate per month = 6/12 = 0.5% per month

Time (n) = 5 * 12 = 60 months

Loan amount = 120000

If the loan amount is P, rate on interest (monthly is r, and loan term is n the EMI will be

EMI= P*r[(1 +r)^n]/ [(1+ r)^n- 1]

= 120000*0.005[(1 +0.005)^60]/ [(1+ 0.005)^60- 1]

= 600[(1.005)^60]/ [(1.005)^60- 1]

= 600[1.35]/ [1.3488501525493- 1]

= 600[1.35]/ [0.348850152549304]

= 600[3.86985641294567]

= 2321.914

So EMI will be $2321.914

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Hope this answer your query.

Feel free to comment if you need further assistance. J