Answer:
$587.13
Step-by-step explanation:
Monthly Payment Formula
[tex]\sf PMT=\dfrac{Pi(1+i)^n}{(1+i)^n-1}[/tex]
where:
- PMT = monthly payment
- P = loan amount
- i = interest rate per month (in decimal form)
- n = term of the loan (in months)
Given:
- P = $25,000
- i = 0.005
- n = 48
To calculate i, divide the interest rate per annum by 12 and convert to decimal form:
[tex]\implies \sf i=\dfrac{6\%}{12}=\dfrac{0.06}{12}=0.005[/tex]
Substitute the given values into the formula and solve for PMT:
[tex]\implies \sf PMT=\dfrac{25000 \cdot 0.005(1+0.005)^{48}}{(1+0.005)^{48}-1}[/tex]
[tex]\implies \sf PMT=\dfrac{125(1.005)^{48}}{(1.005)^{48}-1}[/tex]
[tex]\implies \sf PMT=587.1257262...[/tex]
Therefore, the monthly repayment required to pay this loan off in 48 equal installments is $587.13 (nearest cent).
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