Find the periodic payment

Question

Find the periodic payment R required to amortize a loan of P dollars over t years with interest charged at the rate of r%/year compounded m times a year. P=12000, r=3, t=7, m=2

Answer 1

The answer R is calculated by

R = P * ( (r(1 + r)ⁿ) /((1 + r)ⁿ - 1) )

Principal (P) = 12000

Rate(r) = 3%=0.03

Time (t) = 7 years

m=2

n=t*m

n=7×2=14

R = 12000 * ( (.03(1+0.03)¹⁴)/((1+0.03)¹⁴-1) )

R = 12000 * ( (.03*1.03¹⁴)/1.03¹⁴-1 )

R = 12000 * ( (0.03*1.512)/(1.512-1) )

R = 12000 * ( (0.045 / 0.512) )

R = 12000 * ( 0.087 )

R = 1044