You borrow $95,000 for 12 years at an annual rate of 12%. What are the monthly payments required to amortize this loan?
A) $ 1,248
B) $15,336
C) $ 3,936
D) $11,400

Question

Quizplus · Accepted Answer

To calculate the monthly payment required to amortize a loan, you can use the formula for a fixed-rate loan, which is often represented in financial calculators or spreadsheet functions as PMT(rate, nper, pv), where rate is the monthly interest rate (annual rate divided by 12), nper is the total number of payments (years times 12), and pv is the loan amount (present value). For this loan, the monthly interest rate is 12% / 12 = 1%, or 0.01 as a decimal. The total number of payments is 12 years * 12 months/year = 144 months. Plugging these values into the formula or a financial calculator, you get a monthly payment of approximately $1,248.

You Borrow $95,000 for 12 Years at an Annual Rate