Horace and Myrtle 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 installments over the next 20 years?

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The monthly payment for a fully amortizing loan can be calculated using the following formula:M = P * (r * (1 + r)^n) / ((1 + r)^n - 1)where:M = monthly paymentP = principal amount of the loanr = annual interest rate (as a decimal)n = number of months over which the loan will be repaidIn this case, we have:P = $95,000r = 12% / 12 = 0.01n = 20 years * 12 months/year = 240 monthsPlugging these values into the formula, we get:M = 95000 * (0.01 * (1 + 0.01)^240) / ((1 + 0.01)^240 - 1)= 95000 * (0.01 * (1.01)^240) / ((1.01)^240 - 1)= 95000 * (0.01 * 2.7148) / (2.7148 - 1)= 95000 * (0.027148) / (1.7148)= 95000 * 0.01583= $1,506.35Therefore, the monthly payment will be $1,506.35.

Horace and Myrtle Want to Buy a House