# Finance homework help

Anonymous
account_balance_wallet \$5

### Question Description

2. A small-business owner has a debt of \$81, 319.50 at a rate of 10%. The goal is to pay off this debt in 7 years. What should the monthly payment be in order to meet this goal?

RodneyH
School: Duke University

Q)  A small-business owner has a debt of \$81, 319.50 at a rate of 10%. The goal is to pay off this debt in 7 years. What should the monthly payment be in order to meet this goal?

A)  Understand the equation. In order to calculate the monthly payment, we can rely on a relatively simple equation. The monthly payment equation can be represented as follows:

r(1+r)^n
M=P------------
(1+r)^n - 1

These variables represent the following inputs:

r is your monthly interest rate, calculated by dividing your annual interest rate by 12.
n is your number of payments (the number of months you will be paying the loan)
^ implies exponent (i.e. 2^3 = 2*2*2 )

For your question the known values are:

Payments are to be based on making a monthly payment
P = 81319.50
r = (10%/12) = (0.1/12) = 0.00833
n = (7 years * 12 months/year) =(7*12)(years * months/years) = 84 months

r(1+r)^n
M=P------------
(1+r)^n - 1

0.00833(1+0.00833)^84
M=(81319.50)-------------------------------
(1+0.00833)^84 - 1

M=1350.00

Which you can verify with the MS-Excel PMT formula:

flag Report DMCA
Review

Anonymous
Tutor went the extra mile to help me with this essay. Citations were a bit shaky but I appreciated how well he handled APA styles and how ok he was to change them even though I didnt specify. Got a B+ which is believable and acceptable.

Brown University

1271 Tutors

California Institute of Technology

2131 Tutors

Carnegie Mellon University

982 Tutors

Columbia University

1256 Tutors

Dartmouth University

2113 Tutors

Emory University

2279 Tutors

Harvard University

599 Tutors

Massachusetts Institute of Technology

2319 Tutors

New York University

1645 Tutors

Notre Dam University

1911 Tutors

Oklahoma University

2122 Tutors

Pennsylvania State University

932 Tutors

Princeton University

1211 Tutors

Stanford University

983 Tutors

University of California

1282 Tutors

Oxford University

123 Tutors

Yale University

2325 Tutors