Type of calculation: Fixed monthly payment (annuity) on
an amortizing loan.
The formula:
First convert the annual rate to a monthly rate and count the payments:
- i = annual rate / 100 / 12 (monthly rate)
- n = years × 12 (number of payments)
M = P × i / (1 − (1 + i)^(−n))M = P / n
Given: P = $
20000, rate =
6%, years =
5
i =
6 / 100 / 12 =
0.005
n =
5 × 12 =
60 (1 + i)^(−n) = 0.741372
M = $20000 × 0.005 / (1 − 0.741372) ≈ $386.66M = $20000 / 60 ≈ $333.33
Total repaid = M × n
≈ $
23199.36
Total interest = Total repaid − P = $
23199.36 − $
20000 ≈ $
3199.36 (about
16% of the amount borrowed)
