Question

Solve using financial calculator and show steps please

A borrower is evaluating a loan $100,000 with annual rate of interest at 12%. He anticipates making monthly payments of $2,100 then a lump sum payment of $10,000. How long is he expecting to be paying this loan rounded to the nearest number years / months?

Answer 1

The number of years/months is calculated using financial calculator as below :

I/Y = 1 (monthly interest rate = annual rate / 12 = 12%/12 = 1%)

PMT = -2100 (Monthly payment. This is entered with a negative sign because it is a cash outflow)

PV = 100000 (Loan amount. This is entered with a negative sign because it is a cash inflow today)

FV = -10000 (Lumpsum payment at end. This is entered with a negative sign because it is a cash outflow)

CPT --> N

N is calculated to be 60.08

It will take 60.08 months to pay off the loan.

Rounded off, it will take 60 months, or 5 years to pay off the loan.