Question

2) Sarah takes a small business loan for
$25,000. The term for repayment is 60
months and the interest rate is 5.75%.
formula,
Use the loan amortization
what is the estimated monthly
payment?

Answer 1

Using it's formula, it is found that the estimate monthly payment is of $480.42.

What is the monthly payment formula?

It is given by:

$A = P\frac{\frac{r}{12}\left(1 + \frac{r}{12}\right)^n}{\left(1 + \frac{r}{12}\right)^n - 1}$

In which:

• P is the initial amount.

• r is the interest rate.

• n is the number of payments.

The parameters are given as follows:

P = 25000, n = 60, r = 0.0575.

Hence:

r/12 = 0.0575/12 = 0.00479167.

Hence the payment will be of:

$A = P\frac{\frac{r}{12}\left(1 + \frac{r}{12}\right)^n}{\left(1 + \frac{r}{12}\right)^n - 1}$

$A = 25000(0.00479167)\frac{(1+0.00479167)^{60}}{(1+0.00479167)^{60}-1}$

A = 480.42.

More can be learned about the monthly payment formula at https://brainly.com/question/25537936

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