The Flemings secured a bank loan of $96,000 to help finance the purchase of a house. The bank charges interest at a rate of 11 %/year on the unpaid balance, and interest computations are made at the end of each month. The Flemings have agreed to repay the loan in equal monthly installments over 27 years. What should be the size of each repayment if the loan is to be amortized at the end of the term? Please round the answer to the nearest cent.

Question

The Flemings secured a bank loan of $96,000 to help finance the purchase of a house. The bank charges interest at a rate of 11 %/year on the unpaid balance, and interest computations are made at the end of each month. The Flemings have agreed to repay the loan in equal monthly installments over 27 years. What should be the size of each repayment if the loan is to be amortized at the end of the term? Please round the answer to the nearest cent. ​

Quizplus · Accepted Answer

The monthly payment can be calculated using the formula for an amortizing loan: P = [r*PV] / [1 - (1 + r)^-n], where P is the monthly payment, r is the monthly interest rate (11%/12), PV is the present value or loan amount ($96,000), and n is the total number of payments (27*12). Calculating this gives approximately $928.27.

The Flemings Secured a Bank Loan of $96,000 to Help