Use a calculator to evaluate the amortization formula P(=) 1-(1+4) m= $ -nt for the values of the variables P, r, and t (respectively). Assume n = 12. (Round your answer to the nearest cent.) $150,000; 7%; 25 yr

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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### Evaluating the Amortization Formula

Use a calculator to evaluate the amortization formula:

\[
m = \frac{P \left(\frac{r}{n}\right)}{1 - \left(1 + \frac{r}{n}\right)^{-nt}}
\]

for the values of the variables \( P \), \( r \), and \( t \) (respectively). Assume \( n = 12 \). (Round your answer to the nearest cent.)

- Principal (P): $150,000
- Annual Interest Rate (r): 7%
- Time Period (t): 25 years

Enter your answer below:

\[
\$
\]

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---

**Explanation of the Amortization Formula:**

- **P**: Principal amount (the initial amount of the loan)
- **r**: Annual interest rate (expressed as a decimal)
- **n**: Number of payment periods per year
- **t**: Number of years
- **m**: Monthly payment

This formula helps calculate the monthly mortgage payment by taking into account the loan amount, interest rate, payment frequency, and loan term. Using the given values and assumptions, you can compute the monthly payment necessary to amortize the loan over the stated period.
Transcribed Image Text:### Evaluating the Amortization Formula Use a calculator to evaluate the amortization formula: \[ m = \frac{P \left(\frac{r}{n}\right)}{1 - \left(1 + \frac{r}{n}\right)^{-nt}} \] for the values of the variables \( P \), \( r \), and \( t \) (respectively). Assume \( n = 12 \). (Round your answer to the nearest cent.) - Principal (P): $150,000 - Annual Interest Rate (r): 7% - Time Period (t): 25 years Enter your answer below: \[ \$ \] **Need Help?** - [Read It] (Button for text-based help) - [Watch It] (Button for video-based help) --- **Explanation of the Amortization Formula:** - **P**: Principal amount (the initial amount of the loan) - **r**: Annual interest rate (expressed as a decimal) - **n**: Number of payment periods per year - **t**: Number of years - **m**: Monthly payment This formula helps calculate the monthly mortgage payment by taking into account the loan amount, interest rate, payment frequency, and loan term. Using the given values and assumptions, you can compute the monthly payment necessary to amortize the loan over the stated period.
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