Given:
Loan Amount: $12,000
Loan Terms: 5 years = 60 months = n (convert years to months)
Interest Rate: 4.5% =
Monthly Loan Payment Formula:
Monthly Loan Payment =
Substitute given values into Monthly Payment Formula:
Monthly Loan Payment =
Monthly Loan Payment = $223.72 ( rounded to two decimal places)
Notes:
Total Cost = Monthly Loan Payment * Number of Payments
Total Cost = $223.72 * 60 = $13,423.20
Interest Cost = Total Cost – Loan Amount
Interest Cost = $13,423.20 – $12,000 = $1,423.20
Loan Amount: $12,000
Loan Terms: 5 years = 60 months = n (convert years to months)
Interest Rate: 4.5% =
4.5/100
= 0.045 = r (convert percent to a decimal)Monthly Loan Payment Formula:
Monthly Loan Payment =
Loan Amount *
r
/
12
/
1 – ( 1+ r/12
) -n
Substitute given values into Monthly Payment Formula:
Monthly Loan Payment =
12,000 *
0.045
/
12
/
1 – ( 1+ 0.045/12
) -60
Monthly Loan Payment = $223.72 ( rounded to two decimal places)
Notes:
Total Cost = Monthly Loan Payment * Number of Payments
Total Cost = $223.72 * 60 = $13,423.20
Interest Cost = Total Cost – Loan Amount
Interest Cost = $13,423.20 – $12,000 = $1,423.20
