Given:
Loan Amount: $20,000
Loan Terms: 5 years = 60 months = n (convert years to months)
Interest Rate: 6% =
Monthly Loan Payment Formula:
Monthly Loan Payment =
Substitute given values into Monthly Payment Formula:
Monthly Loan Payment =
Monthly Loan Payment = $386.66 ( rounded to two decimal places)
Notes:
Total Cost = Monthly Loan Payment * Number of Payments
Total Cost = $386.66 * 60 = $23,199.60
Interest Cost = Total Cost – Loan Amount
Interest Cost = $23,199.60 – $20,000 = $3,199.60
Loan Amount: $20,000
Loan Terms: 5 years = 60 months = n (convert years to months)
Interest Rate: 6% =
6/100
= 0.06 = 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 *
0.06
/
12
/
1 – ( 1+ 0.06/12
) -60
Monthly Loan Payment = $386.66 ( rounded to two decimal places)
Notes:
Total Cost = Monthly Loan Payment * Number of Payments
Total Cost = $386.66 * 60 = $23,199.60
Interest Cost = Total Cost – Loan Amount
Interest Cost = $23,199.60 – $20,000 = $3,199.60
