Given:
Loan Amount: $40,000
Loan Terms: 10 years = 120 months = n (convert years to months)
Interest Rate: 8% =
Monthly Loan Payment Formula:
Monthly Loan Payment =
Substitute given values into Monthly Payment Formula:
Monthly Loan Payment =
Monthly Loan Payment = $485.31 ( rounded to two decimal places)
Notes:
Total Cost = Monthly Loan Payment * Number of Payments
Total Cost = $485.31 * 120 = $58,237.20
Interest Cost = Total Cost – Loan Amount
Interest Cost = $58,237.20 – $40,000 = $18,237.20
Loan Amount: $40,000
Loan Terms: 10 years = 120 months = n (convert years to months)
Interest Rate: 8% =
8/100
= 0.08 = 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 =
40,000 *
0.08
/
12
/
1 – ( 1+ 0.08/12
) -120
Monthly Loan Payment = $485.31 ( rounded to two decimal places)
Notes:
Total Cost = Monthly Loan Payment * Number of Payments
Total Cost = $485.31 * 120 = $58,237.20
Interest Cost = Total Cost – Loan Amount
Interest Cost = $58,237.20 – $40,000 = $18,237.20
