   Chapter 12.III, Problem 23RE ### Contemporary Mathematics for Busin...

8th Edition
Robert Brechner + 1 other
ISBN: 9781305585447

#### Solutions

Chapter
Section ### Contemporary Mathematics for Busin...

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

# Randy Scott purchased a motorcycle for $8,500 with a loan amortized over 5 years at 7.2% interest. What equal monthly payments are required to amortize this loan? To determine To calculate: The amount of monthly loan payment to be made for the loan by Randy Scott for the purchase of motorcycle of$8,500 at the end of every month at 7.2% interest compounded monthly for the loan of $8,500 in 5 years. Explanation Given Information: Payment frequency is 1 month, time duration is 5 years, nominal rate of return is 7.2% and interest is compounded monthly and present value amount is$8,500.

Formula used:

The formula to compute the amortization payment is,

Amortization payment=PV×i1(1+i)n

Where, PV is the present value, i is the interest rate per period, n is the number of periods.

Calculation:

Consider that payment frequency is 1 month, time duration is 5 years, nominal rate of return is 7.2% and interest is compounded monthly and present value amount is \$8,500.

The rate period is 0.6% or 0.006(7.2%÷12 period per year).

The number of periods is 60(5 years×12 period per year)

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