QuestionMay 31, 2025

Brendon Walsh wants to borrow 40,000 from the bank. The interest rate is 6% and the term is for 5 years. What is the monthly payment amount? 866.67 360 1,800 630

Brendon Walsh wants to borrow 40,000 from the bank. The interest rate is 6% and the term is for 5 years. What is the monthly payment amount? 866.67 360 1,800 630
Brendon Walsh wants to borrow 40,000 from the bank. The interest rate is 6% and the term is for 5 years. What is the monthly payment amount? 866.67 360 1,800 630

Solution
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Answer

\ 773.84 Explanation 1. Identify the formula for monthly payment Use the loan amortization formula: M = \frac{P \cdot r \cdot (1 + r)^n}{(1 + r)^n - 1}, where M is the monthly payment, P is the principal amount, r is the monthly interest rate, and n is the number of payments. 2. Calculate monthly interest rate Convert annual interest rate to monthly: r = \frac{6\%}{12} = 0.005. 3. Determine number of payments Calculate total number of payments: n = 5 \times 12 = 60. 4. Compute monthly payment Substitute values into the formula: M = \frac{40000 \cdot 0.005 \cdot (1 + 0.005)^{60}}{(1 + 0.005)^{60} - 1}. 5. Simplify and solve Calculate: M \approx 773.84.

Explanation

1. Identify the formula for monthly payment<br /> Use the loan amortization formula: $M = \frac{P \cdot r \cdot (1 + r)^n}{(1 + r)^n - 1}$, where $M$ is the monthly payment, $P$ is the principal amount, $r$ is the monthly interest rate, and $n$ is the number of payments.<br /><br />2. Calculate monthly interest rate<br /> Convert annual interest rate to monthly: $r = \frac{6\%}{12} = 0.005$.<br /><br />3. Determine number of payments<br /> Calculate total number of payments: $n = 5 \times 12 = 60$.<br /><br />4. Compute monthly payment<br /> Substitute values into the formula: $M = \frac{40000 \cdot 0.005 \cdot (1 + 0.005)^{60}}{(1 + 0.005)^{60} - 1}$.<br /><br />5. Simplify and solve<br /> Calculate: $M \approx 773.84$.
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