Frankie and Emerson want to buy a house.Their banker offered them a fully amortising $95 000 loan at a 12% annual rate for 20 years.What will their monthly payment be if they make equal monthly instalments over the next 20 years?

Question

Quizplus · Accepted Answer

To calculate the monthly payment for a fully amortizing loan, you can use the formula for the monthly payment on an amortizing loan: $PMT = P \times \frac{r(1+r)^n}{(1+r)^n-1}$, where $P$ is the principal amount ($95,000), $r$ is the monthly interest rate (annual rate divided by 12 months, so 12%/12 = 1%), and $n$ is the total number of payments (20 years \times 12 months/year = 240 months). Plugging in the values: $PMT = 95000 \times \frac{0.01(1+0.01)^{240}}{(1+0.01)^{240}-1}$, which calculates to approximately $1046.

Frankie and Emerson Want to Buy a House