Question

Susan took out a personal loan for $3,500 at an interest rate of 13% compounded monthly. She made arrangements to pay the loan off in 3 years. What will her monthly payment be?

Answer 1

The monthly payment amounts to $117.93

Explanation:

The monthly payment of the loan is computed using the Excel formula of PMT (Payment monthly) as:

=PMT(rate,nper,pv,fv,type)

where

rate is 13%

But it is compounded monthly, so, rate will be

r = 13%/12

nper is number of years which is 3 years

But it is compounded monthly, so, nper will be

nper = 3 × 12

nper = 36 months

pv is Present value which is -$3,500

fv is future value which is $0

Putting the values above:

=PMT(13%/12,3× 12,-3500,0)

= $117.93

Therefore, the monthly payment amounts to $117.93