A $60,000 loan with an annual interest rate of 10% is scheduled to be paid over three years (36 months).

Step 1: What is the monthly interest rate (in percent up to 4 decimal places)?

Step 2: How much interest expense (in dollars and cents) will incur in the first month with the loan balance at $60,000?

Step 3: Use the formula from the lecture (below) to determine the monthly payment (in dollars and cents). Remember that to use a % in a calculation you need to move the decimal sign left two places.

A=P r(1+r)ⁿ

(1+r)ⁿ-1

Where

• A= payment Amount per period
• P= initial Principal (loan amount)
• r=interest rate per period
• n- total number of payments or periods.

Step 4: How much (in dollars and cents) of this first monthly payment went to principal?

Step 5: What is the remaining loan balance (in dollars and cents) after the first payment?

Step 6: Watch thisvideoand use an Excel spreadsheet to determine how much interest expense (in dollars and cents) was paid out over the entire loan.

Step 7: How much (in dollars and cents) was paid out total (principal and interest) over the entire loan?