What are the payments on a $12,500, four-year bank loan at 12% compounded monthly?

Question

Quizplus · Accepted Answer

We can use the formula for monthly loan payments:

P = A / (((1 + r)^n) - 1) / (r(1+r)^n)

where P is the monthly payment, A is the loan amount, r is the monthly interest rate (12%/12 = 0.01), and n is the total number of payments (4 years * 12 months/year = 48).

Plugging in the values, we get:

P = 12,500 / (((1 + 0.01)^48) - 1) / (0.01(1+0.01)^48)
P ≈ $329.17

Therefore, the answer is B, $329.17.

What Are the Payments on a $12,500, Four-Year Bank Loan