If you were to borrow $10,000 over five years at 12% compounded monthly, what would be your monthly payment?
A)$122.44
B)$222.44
C)$168.38
D)$187.28

Question

Quizplus · Accepted Answer

The correct monthly payment can be calculated using the formula for a fixed-rate loan, which is often represented as P = [r*PV] / [1 - (1 + r)^-n], where P is the monthly payment, r is the monthly interest rate (annual rate divided by 12), PV is the present value or loan amount, and n is the total number of payments (months). For a $10,000 loan at 12% annual interest compounded monthly over five years (60 months), the monthly interest rate is 1%, or 0.01 when expressed as a decimal. Plugging these values into the formula gives a monthly payment of approximately $222.44.

If You Were to Borrow $10,000 Over Five Years at 12