Question

Determine the payment to amortize the debt. (Round your answer to the nearest cent.) Monthly payments on $170,000 at 4% for 25 years.

Answer 1

Answer:

The payment would be $ 897.32.

Step-by-step explanation:

Since, the monthly payment of a loan is,

$P=\frac{PV(r)}{1-(1+r)^{-n}}$

Where, PV is the present value of the loan,

r is the monthly rate,

n is the total number of months,

Here,

PV = $170,000,

Annual rate = 4 % = 0.04

So, the monthly rate, r = $\frac{0.04}{12}=\frac{1}{300}$  ( 1 year = 12 months )

Time in years = 25,

So, the number of months, n = 12 × 25 = 300

Hence, the monthly payment of the debt would be,

$P=\frac{170000(\frac{1}{300})}{1-(1+\frac{1}{300})^{-300}}$

$=897.322628506$

$\approx \ 897.32$