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show that the payment required to repay a loan of $150000 in 360 months at 5% interest is $805.23

Mathematics
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show that the payment required to repay a loan of $150000 in 360 months at 5% interest is $805.23 using the equation A=P(r/12)/1-(1+r/12)-n

Mar 24th, 2015

P = $150000 - principal;  r = 0.05 = 5% yearly interest;  n = 360 months

P * r / 12 = 150000 * 0.05 / 12 = $625

(1+ r/12)^{-360} = 0.223837; 1 - 0.223837 = 0.776173

Finally, (P*r/12) / (1 - (1+ r/12)^{-360}) = $625 / 0.776173 = $805.23 is the monthly payment.

Mar 24th, 2015

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