Answer to Question #304494 in Microeconomics for emu

Question

a manufacture has 15 years, 8.5 mortgage for 100,000 birr on a building payment are made monthly.

a. find the month payment

b. how much interest will be paid

Answer 1

Loan amount= 100,000 birr

Monthly rate = 8.5/12= 0.71%

Number of periods (n) = 15 years* 12 months = 180 months

a)

Monthly payment $=\frac {100,000} {{1-\frac {1}{1+ 0.0071}^{180}}}$

$=\frac {100,000} {{1-\frac {1}{1.0071}^{180}}}$

$=\frac {100,000}{{\frac{1-28} {0.0071}}}$

$=\frac {100,000}{101.43}$

$= 985.91 \space birr$

b)

$=\frac{985.91}{101.91}$

$= 9.72\%$