Chapter 12, Problem 12AT

### Contemporary Mathematics for Busin...

8th Edition
Robert Brechner + 1 other
ISBN: 9781305585447

Chapter
Section

### Contemporary Mathematics for Busin...

8th Edition
Robert Brechner + 1 other
ISBN: 9781305585447
Textbook Problem

# Use Table 12-2 to calculate the amount of the periodic payment required to amortize (pay off) the following loans. Loan Payment Term of Nominal Interest Present Value Payment Period Loan (years) Rate (%) Compounded (Amount of Loan) 12. every month 2 1 2 6 monthly $20,000 To determine To calculate: The amount of loan payment where payment frequency is 1 month, time duration is 212 years, nominal rate of return is 6%, present value amount is$20,000 and interest is compounded monthly.

Explanation

Given Information:

Payment frequency is 1 month, time duration is 212 years, nominal rate of return is 6%, present value amount is $20,000 and interest is compounded monthly. Formula used: Steps to compute the amount of an amortization payment; Step 1: First find the present value table factor from table 12-2 by using appropriate rate and number of periods of the amortization. Step 2: Compute the amount of amortization payment. The formula to the amount of an amortization payment; Amortization payment=Original amount of obligationPresent value table factor Calculation: Consider that payment frequency is 1 month, time duration is 212 years, nominal rate of return is 6%, present value amount is$20,000 and interest is compounded monthly.

As the interest is compounded monthly. So, the interest rate period is;

6%12=0

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