Question

You borrow $24,000 . The loan is to be repaid in 60 equal monthly installments at...

You borrow $24,000 . The loan is to be repaid in 60 equal monthly installments at an annual interest rate of 6.0 percent. What percentage of your first month's payment is interest?

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Answer #1

The question is solved by first solving the monthly payment.

Information provided:

Present value= $24,000

Time= 60 months

Interest rate= 6%/12= 0.50% per month

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

PV= -24,000

N= 60

I/Y= 0.50

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

The value obtained is 463.99.

Therefore, the monthly payment is $463.99

First month's payment= 0.50*463.99

= $231.99.

Percentage of interest in first month's payment= $231.99/ $463.99*100

= 0.50*100

= 50%.

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