Question

Use technology to determine the monthly payment amount required to repay a credit loan of $12,500, compounded monthly, at 1.6% for 5 years? How much interest is paid ?

Answer 1

Information provided:

Present value= $12,500

Time= 5 years*12 = 60 months

Interest rate= 1.6%/12 = 0.1333% per month

The monthly payment is calculated by entering the below in a financial calculator:

PV= -12,500

N= 60

I/Y= 0.1333

Press the CPT key and PMT to compute the monthly payment.

The value obtained is 216.9165

Therefore, the monthly payment is $216.92.

Interest payment = ($216.92*60) - $12,500

= ($216.92*60) - $12,500

= $13,015.20 - $12,500

= $515.20.