Question

- What is the size of payment needed to pay off the following loan scenarios?

- $180,000 principal, monthly payments, 6% interest, 15 year term.

- $180,000 principal, annual payments, 6% interest, 30 year term.

Answer #1

a)

EMI = [P x R x (1+R)^N]/[(1+R)^N-1] |

Where, |

EMI= Equal Monthly Payment |

P= Loan Amount |

R= Interest rate per period =6%/12 =0.5% |

N= Number of periods =15*12 =180 |

= [ $180000x0.005 x (1+0.005)^180]/[(1+0.005)^180 -1] |

= [ $900( 1.005 )^180] / [(1.005 )^180 -1 |

=$1518.94 |

b)

Annual Payment = [P x R x (1+R)^N]/[(1+R)^N-1] |

Where, |

P= Loan Amount |

R= Interest rate per period =6% |

N= Number of periods =30 |

= [ $180000x0.06 x (1+0.06)^30]/[(1+0.06)^30 -1] |

= [ $10800( 1.06 )^30] / [(1.06 )^30 -1 |

=$13076.8 |

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