Given:
Loan Amount: $20,000
Loan Terms: 6 years = 72 months = n (convert years to months)
Interest Rate: 5% =
Monthly Loan Payment Formula:
Monthly Loan Payment =
Substitute given values into Monthly Payment Formula:
Monthly Loan Payment =
Monthly Loan Payment = $322.10 ( rounded to two decimal places)
Notes:
Total Cost = Monthly Loan Payment * Number of Payments
Total Cost = $322.10 * 72 = $23,191.20
Interest Cost = Total Cost – Loan Amount
Interest Cost = $23,191.20 – $20,000 = $3,191.20
Loan Amount: $20,000
Loan Terms: 6 years = 72 months = n (convert years to months)
Interest Rate: 5% =
5/100
= 0.05 = 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 =
20,000 *
0.05
/
12
/
1 – ( 1+ 0.05/12
) -72
Monthly Loan Payment = $322.10 ( rounded to two decimal places)
Notes:
Total Cost = Monthly Loan Payment * Number of Payments
Total Cost = $322.10 * 72 = $23,191.20
Interest Cost = Total Cost – Loan Amount
Interest Cost = $23,191.20 – $20,000 = $3,191.20
