Solve the problem.
-Find the periodic payment of a loan with present value $161,000 and an annual interest rate 5% for a term of 24 years, with payments made and interest charged 12 times per year.
A) $961.00
B) $1729.81
C) $1922.01
D) $768.80

Question

Quizplus · Accepted Answer

The periodic payment can be calculated using the formula for the payment of an annuity: $PMT = \frac{PV \times r}{1 - (1 + r)^{-n}}$, where $PMT$ is the periodic payment, $PV$ is the present value of the loan, $r$ is the monthly interest rate (annual rate divided by 12), and $n$ is the total number of payments (years times 12). Here, $PV = 161,000$, $r = 0.05/12$, and $n = 24 \times 12$. Plugging these values into the formula gives $PMT = \frac{161,000 \times (0.05/12)}{1 - (1 + 0.05/12)^{-288}} \approx 961.00$.

Solve the Problem. -Find the Periodic Payment of a Loan with Present Value