March 13, 2010 at March 13, 2010 · Filed under enart.nnxj.comedit
Consider a 4-year amortizing loan. If i borrow $1,000 initially, and
repay it in four equal annual year-end payments and the interest rate
is 8 percent, how can i show that the annual payment is $301.92?Below is the formula for figuring this out.
http://www.hughchou.org/calc/formula.html
"First you must define some variables to make it easier to set up:
P = principal, the initial amount of the loan
I = the annual interest rate (from 1 to 100 percent)
L = length, the length (in years) of the loan, or at least the length
over which the loan is amortized.
The following assumes a typical conventional loan where the interest
is compounded monthly. First I will define two more variables to make
the calculations easier:
J = monthly interest in decimal form = I / (12 x 100)
N = number of months over which loan is amortized = L x 12"
You can use this for yearly payments as well. Just use the number of
years for "N" and the annual interest rate for "J".
M = P * ( J / (1 - (1 + J) ** -N))
M = 1000 * (.08 / (1 - (1 + .08) ** -4))
M = 1000 * (.08 / (1 - (1.08) ** -4))
M = 1000 * (.08 / (1 - .73503))
M = 1000 * (.08 / .26497)
M = 1000 * .30192
M = 301.92
If you need any further explanation please let me know by posting a
request for clarification.
Thanks!#If you have any other info about this subject , Please add it free.# |
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