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Math of Finance Monthly Payments

You find a small business loan in the amount of 50,000 is the amount you need to purchase the restaurant location. After researching banks to find the best interest rate, you find that the best interest rate of 9% intersest that compounds monthly for seven years.

1. What is the monthly payment for this loan? Show the formula used and the values used for each variable to calculate the monthly payment.

2. What is the unpaid balance of the loan at the end of the 1st year? Show the formula that was used and the values used for each variable to calculate the unpaid balance at the end of the first year.

3. What is the unpaid balance at the end of the 6th year? Show the formula that was used for each variable to calculate the unpaid balance at the end of the 6th year.

Solution Preview

This is a typical loan payment problem that can be solved with Microsoft Excel. The figures below were calculated using the attached Microsoft Excel spreadsheet. The spreadsheet was created to allow for any numbers to be entered.

1. What is the monthly payment for this loan? Show the formula used and the values used for each variable to calculate the monthly payment.
The monthly payment for the loan will be $804.45 over the course of 7 years (84 months). The Excel formula to ...

Solution Summary

The math of monthly payments are examined. The unpaid balance at the end of the year is determined.

$2.19