With a Fixed Principal Commercial Loan where the amount borrowed is $120,000 for 5 years at 8 percent.The first monthly payment will be:
A)$2,000
B)$2,800
C)$9,600
D)$11,600

Question

Quizplus · Accepted Answer

To calculate the monthly payment for a fixed principal commercial loan, we can use the following formula:

Payment = Principal / [n(1+r)]

Where:
Principal = $120,000
n = number of payments (60 for 5 years at monthly intervals)
r = interest rate per period (8% per year, or 0.08/12 per month)

Plugging in these values, we get:
Payment = 120000 / [60(1+(0.08/12))] = $2,797.22

Rounding to the nearest cent, the first monthly payment will be $2,800, which is the best choice.

With a Fixed Principal Commercial Loan Where the Amount Borrowed