loan rates?
Written By: aaren on May 3, 2009
One Comment
Yvette takes out a conventional loan to buy a car. The interest rate is 6.2% compounded monthly and Yvette has five years to repay the 00 she borrowed. What are Yvettes payments?
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Tags: conventional loan, fixed rate private student loan consolidation, home equity loan lowest rate, interest rate, yvette
The formula I found for this is:
P = Cr(1 + r)ⁿ/[(1 + r)ⁿ - 1]
where C is the amount of the loan ($9600), r is the interest rate, and n is the number of months (5 × 12 = 60).
Again with the interest rate, to make it realistic, you don't mean that it's 6.2% compounded monthtly. You mean that it's 6.2% annually, compounded monthly, which makes the actual monthly interest rate 6.2%/12 = 0.51666666667%.
P = $9,600(0.0051666666667)(1 + 0.0051666666667)^60/[(1 + 0.0051666666667)^60 - 1]
P = $186.49 per month
Which means that, after 60 months, she will have really paid:
$186.49 × 60 = $11,189.34
on her initial loan of $9,600.