You need to borrow $30 000 to pay for urgent medical treatment.Your bank has offered you a 3-year amortising loan at 9% interest per annum.If the bank requires monthly payments and interest is added monthly what is the amount of your monthly repayment?

Question

Quizplus · Accepted Answer

To calculate the monthly repayment, we need to use the formula for calculating the monthly payment on an amortising loan:

M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1]

Where:
M = monthly payment
P = principal (the amount borrowed)
i = monthly interest rate (9% annual interest / 12 months in a year = 0.0075)
n = total number of payments (3 years x 12 months per year = 36)

Plugging in the numbers:

M = 30,000 [ 0.0075(1 + 0.0075)^36 ] / [ (1 + 0.0075)^36 – 1]
M ≈ 953.99

So the monthly repayment is $953.99, which is closest to answer choice B.

You Need to Borrow $30 000 to Pay for Urgent