+598 Debt Principal = $8000 Repayment Period = 5 years Payment Period = 1 month Interest Rate = 12% Compounding Period = Monthly All payments made at the end of each payment interval.
(a) What are the size of the periodic payments?
(b) The interest paid(first period)?
(c) The principal repaid(first period)?
(d) The balance for the first period
Any help with steps would be greatly appreciated. Thanks
a-The size of periodic payment=$177.96
b-Interest for 1st, period=$80.00
c-Principal repaid for 2st.period=$97.96
d-Balance for the 1st.period=$7,902.04
Here is the formula you use to calculate this, if you wish to check it:
PMT=PV. R.{[1 + R]^N/ [1 + R]^N - 1}=PMT NEEDED TO PAY OFF A LOAN OF $8,000
Where R=Interest rate per period, N=number of periods, P=periodic payment. PV=Present value, FV=Future value.
AMORTIZATION: Since the interest rate is 1% per month, then you just multiply: 1% or .01 x $8,000=$80.00, which is the interest for the 1st. month. Then subtract it from the monthly payment of $177.96 - $80=$97.96 which is principal to be subtracted from the loan of $8,000 - $97.96=$7,902.04.
