Find the monthly house payment necessary to amortize the following loan. In order to purchase a home, a family borrows $70,000 at 12% compunded monthly for 15 years. What is the monthly payment?

Monthly payment is $840.12

Explanation:

we are given: $70000 which is the present value of the loan Pv

12% compounded monthly where the interest rate is adjusted to monthly where i = 12%/12

the period in which the loan will be repaid in 15years which contain 15x12 = 180 monthly payments which is n

we want to solve for C the monthly loan repayments on the formula for present value as we are looking for future periodic payments.

Pv = C[ ((1 - (1+i) ^-n) / i] thereafter we substitute the above mentioned values and soolve for C.

$70000 = C[ ((1 - (1 + (12%/12)) ^-180)) / (12%/12) ] then compute the part that multiplies C in brackets and divide by it both sides.

$70000/83.32166399 = C then you get the monthly loan repayments

C = $840.12 which is the monthly repayments of the $70000 loan.