Given:
Loan Amount: $20,000
Loan Terms: 5 years = 60 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 = $377.42 ( rounded to two decimal places)
Notes:
Total Cost = Monthly Loan Payment * Number of Payments
Total Cost = $377.42 * 60 = $22,645.20
Interest Cost = Total Cost – Loan Amount
Interest Cost = $22,645.20 – $20,000 = $2,645.20
Loan Amount: $20,000
Loan Terms: 5 years = 60 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
) -60
Monthly Loan Payment = $377.42 ( rounded to two decimal places)
Notes:
Total Cost = Monthly Loan Payment * Number of Payments
Total Cost = $377.42 * 60 = $22,645.20
Interest Cost = Total Cost – Loan Amount
Interest Cost = $22,645.20 – $20,000 = $2,645.20
