Question

5. Assume borrow $75,000 for college and have to pay back the loan monthly for 10 years after graduation. If the rate is 6%, what is the amount of your monthly loan payment?

Answer #1

Amount of
monthly loan payment |
= | Loan amount/Present value of annuity of 1 | ||||||||||

= | $ 75,000 | / | 90.0735 | |||||||||

= | $
832.65 |
|||||||||||

Working: | ||||||||||||

Present value of annuity of 1 | = | (1-(1+i)^-n)/i | Where, | |||||||||

= | (1-(1+0.005)^-120)/0.005 | i | 6%/12 | = | 0.005 | |||||||

= | 90.0735 | n | 10*12 | = | 120 | |||||||

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