Answer:
The monthly payment is $ 244.07
Explanation:
The monthly payment van be computed using the pmt formula in excel,which is =pmt(rate,nper,-pv,fv)
rate is the monthly rate on balance after the down payment which is 2%/12=0.001666667
nper is the number of monthly payments required in 4 years i.e 12*4=48
pv is the amount to be paid after deducting the down payment of 10%
$12,500-($12,500*10%)=$11,250
The future value of the repayments is not known,it zero.
=pmt(0.001666667 ,48,-11250,0)
pmt=$244.07
8720Answer:
$244 per month
Explanation:
Monthly payment includes the payment of interest and principal as well. We cannot simply divide the total amount with numbers of payment because there is compounding interest which is behaving differently.
As per given data
Total machinery cost = $12,500
Advance payment = $12,500 x 10% = $1,250
Financing amount = $12,500 - $1,250 = $11,250
Use following formula to calculate monthly payment.
Loan Payment per month = r ( PV ) / 1 - ( 1 + r )^-n
r = rate per period = 2% per year = 2%/12 per month
n = number months = 4 years x 12 months per year = 48 Months
PV = present value of all payments = $11,250
Placing values in the formula
Loan Payment per month = 2%/12 ( $11,250 ) / 1 - ( 1 + 2%/12 )^-48
18.75
Loan Payment per month = $244 per month
