A loan of $30,000 is to be repaid by a level annuity payable monthly at the end of each month for 25 years, and calculated on the basis of an nominal interest rate of 12% per year, compounded monthly.

Calculate the monthly repayments.

• 313
• 316
• 360
• 404
• 420

References

Hlynka, Myron. "University of Windsor Old Tests 62-392 Theory of Interest". web2.uwindsor.ca. Retrieved November 23, 2023.

Solution: B

Effective rate per month is [math].12 / 12=[/math] .01. There are [math]25 \times 12=300[/math] months. Then

[[math]] 30000=K a_{\overline{300} \mid .01}=K \frac{1-v^{300}}{.01}=K \frac{1-1.01^{-300}}{.01}=K(94.94655) . [[/math]]

Thus [math]K=\frac{30000}{94.94655}=315.97[/math].

References

Hlynka, Myron. "University of Windsor Old Tests 62-392 Theory of Interest". web2.uwindsor.ca. Retrieved November 23, 2023.