Question

You take out $50,000 for loans during your college career. You must pay it back with 7% APR for 20 years, making monthly payments. Calculate the minimum monthly payment needed to do this.

Answer 1

The monthly payment for the loan amount for 20 years is $806.167

Explanation:

The principal loan amount= $ 50,000

The rate of interest = 7 %

the time period of loan = 20 years = 20 × 12 = 240 months

let the amount after 20 years = $ A

From Compounded method

Amount = Principal ×
`(1+(\textrm rate)/(100))^(\textrm Time)`

or, A = 50,000 ×
`(1+(\textrm 7)/(100))^(\textrm 20)`

or, A = 50,000 ×
`(1.07)^(20)`

Or, A = 50,000 × 3.8696

∴ Amount = $ 193,480

So, The amount after 20 years = $ 193,480

The monthly payment amount = $
`(193480)/(240)` = $ 806.167

Hence The monthly payment for the loan amount for 20 years is $806.167 Answer