Find the payment necessary to amortize the loan using the amortization table. Round to the nearest cent.
-$6,500, 12% compounded monthly, 33 monthly payments

Question

Find the payment necessary to amortize the loan using the amortization table. Round to the nearest cent. 
-$6,500, 12% compounded monthly, 33 monthly payments

Quizplus · Accepted Answer

Using the formula for monthly payments on an amortized loan:
Payment = (Loan amount * monthly interest rate) / (1 - (1 + monthly interest rate)^-n)
where n is the number of monthly payments.
Plugging in the given values:
Payment = (6500 * 0.01) / (1 - (1 + 0.01)^-33) = 232.25
Therefore, the payment necessary to amortize the loan is $232.25 per month. The closest answer choice is C, which is the correct answer. Using the formula for monthly payments on an amortized loan:

PMT = (P*r)/(1 - (1+r)^(-n))

Where P = principal, r = monthly interest rate, and n = total number of payments.

Plugging in the given values:

PMT = (6500*0.01)/(1 - (1+0.01)^(-33)) = 232.25

So the payment necessary to amortize the loan is $232.25, which corresponds to choice C.

Find the Payment Necessary to Amortize the Loan Using the Amortization