Question

Horace and Myrtle want to buy a house. Their banker offered them a fully amortizing $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

Answer 1

The monthly payment will be $1,046 if they make equal monthly installments over the next 20 years.

Given Information

Present value = $95,000

Time = 20 years*12= 240 months

Interest rate = 12%/12= 1%

Now, the monthly payment will be computed by entering the below in a Ms Excel PMT function.

PV= -95,000

I/Y= 1%

N= 240

Monthly payment = PMT (-PV, I.Y, N)

Monthly payment = PMT (-95000, 1%, 240

Monthly payment = $$1,046

In conclusion, the monthly payment will be $1,046 if they make equal monthly installments over the next 20 years.

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