+216 For a certain installment loan, the monthly payment M is given by
M =
Pr(1 + r)t
(1 + r)t − 1
,
where P is the original amount borrowed, r is the monthly interest rate as a decimal, and t is the number of months required to pay off the loan. What is the monthly payment if the monthly interest rate as a decimal is 0.03, the amount borrowed was $12,000, and the loan is paid off in 24 months? (Round your answer to two decimal places.)
The formula for the monthly payment that you have is slightly wrong:
P = PV. R.{[1 + R]^N/ [1 + R]^N - 1}
P =12,000 x 0.03{[1 + 0.03]^24 / [1 + 0.03]^24 - 1}
P = 360 x { 2.032794 / 1.032794}
P = 360 x 1.968247...
P =$708.57 - The monthly payment!.
P.S. Your monthly interest rate of 3% per month is very, very high!!. It is of course 36% annual rate, compounded monthly!!!. Make sure that the 3% per month is accurate.
