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If a bank lends $5 million at an interest rate of 10% over an 8 year term what would be...

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brittbritt4458 | Student, Grade 11 | (Level 1) Honors

Posted October 27, 2011 at 8:43 AM via web

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If a bank lends $5 million at an interest rate of 10% over an 8 year term what would be the equated monthly installments.

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justaguide | College Teacher | (Level 2) Distinguished Educator

Posted October 28, 2011 at 8:59 PM (Answer #1)

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The loan amount is $5 million and the tenure of payment is 8 years. The annual rate of interest is 10%. Let the amount that has to be repaid every month be E.

The formula for the equated monthly installment is E = P×r×(1 + r)n/((1 + r)n - 1)

Here P = 5000000

r = .05/6

n = 96

E = 5000000*(.05/6)*(1+.05/6)^96/((1 + .05/6)^96 - 1)

=> $75871

The equated monthly installment is $75871

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