Question

What would your payment be on a 35-year, OMR 300,000 loan at 12% interest compounded semi-annually assuming the payments are made monthly?

Answer 1

Given interest rate = 12% compounded semiannually,

So, Effective annual rate = (1+APR/2)^2 - 1 = (1+0.12/2)^2 - 1 = 12.36%

Since payment are monthly, we need to calculate APR compounded monthly,

So, APR compounded monthly = 12*((1+EAR)^(1/12) -1) = 12*((1.1236^(1/12))-1) = 11.71%

Given about loan is

Loan amount PV = OMR 300000

time period t = 35 years

n = 12 months in a years

So, Monthly payment PMT using ordinary annuity formula is

PMT = PV*(r/n)/(1 - (1+r/n)^(-n*t)) = 300000*(0.1171/12)/(1 - (1+0.1171/12)^(-12*35)) = OMR2978.05