Question

Rounding in the calculation of monthly interest rates is discouraged. Such rounding can lead to answers different from those presented here. For long-term loans, the differences may be pronounced. Assume that you take out a $2000 loan for 30 months at 9.5% APR. What is the monthly payment? What is the first month interest?

Answer 1

a.	Monthly payment		$             75.16
b.	First month interest		$             15.83
Working:
	Present value of annuity of 1	=	(1-(1+i)^-n)/i		Where,
		=	26.61035249		i	=	9.5%/12	=	0.00791667
					n			=	30
	Monthly payment	=	Loan amount	/	Present value of annuity of 1
		=	$       2,000.00	/	26.61035
		=	$             75.16
	First month's interest	=	Loan amount	*	Interest rate
		=	$       2,000.00	*	9.5%*1/12
		=	$             15.83