In: Accounting
You borrow $7,000 today and promise to repay the loan over the next three years with 36 equal, end-of-month payments starting one month from today. The interest rate is 4% APR compounded monthly. What is the amount of each payment? Round only your final answer to two decimal places.
• $206.67
• $194.44
• $214.98
• $202.19
• $223.86
The right option is (a).
Explanation:
Monthly payment = Loan amount * (interest rate / compounding frequency) / (1 - (1 + (interest rate / compounding frequency))-no of periods)
Monthly payment = $7000 * (4% / 12) / (1 - (1 + (4% / 12))-36)
Monthly payment = $206.67
(a) is right option.
Hence, the option (a) is right option.
Hence, the option (a) is right option.