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How do I compute the yearly payment for a loan of $500,000 at 12% interest which is amortized over a five year period

 Jul 29, 2015

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 #2
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How do I compute the yearly payment for a loan of $500,000 at 12% interest which is amortized over a five year period

 

You can do it with the present value of an  ordinary annuity formula

$$\\PV = C*\frac{1-(1.12)^{-5}}{0.12}\\\\
500000 = C*3.604776\\\\
c=500000\div 3.604776\\\\
Yearly\;Payment\;=\;\$138,704.87$$

 Jul 30, 2015
 #1
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If it's simple interest the equation is 500,000(.12)=x

If it's compund then the eqquation is a little different. 500,000(.12)^5=x

Just type that into your calculator and you're good to go. I really hope this isn't your homework or something, because that would be totally uncool for you to be cheating like this, taking advantage of the math experts on this website. Just remember, if this is your way of cheating, you can't have electronics on a test and you'll fail.

 Jul 29, 2015
 #2
avatar+118587 
+10
Best Answer

How do I compute the yearly payment for a loan of $500,000 at 12% interest which is amortized over a five year period

 

You can do it with the present value of an  ordinary annuity formula

$$\\PV = C*\frac{1-(1.12)^{-5}}{0.12}\\\\
500000 = C*3.604776\\\\
c=500000\div 3.604776\\\\
Yearly\;Payment\;=\;\$138,704.87$$

Melody Jul 30, 2015

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