What is the payment size of a loan that has semi-annual payments and an interest rate of 5.52% compounded monthly? The loan principal is $1641.12 and the loan is for 48 months.

Question

Quizplus · Accepted Answer

First, we need to calculate the monthly interest rate: 
r = (1 + 0.0552/2)^(1/6) - 1 = 0.004526
Next, we need to calculate the total number of payments over the life of the loan: 
n = 48 x 2 = 96
Finally, we can calculate the payment size using the formula for a loan with monthly compounding: 
P = r(1+r)^n/[(1+r)^n - 1] x PV 
P = 0.004526(1+0.004526)^96/[(1+0.004526)^96 - 1] x $1641.12 
P = $231.74

Note: Choice A is the payment size for a loan with semi-annual compounding, not monthly compounding. Choices C, D, and E are incorrect calculations.

What Is the Payment Size of a Loan That Has