Amortizing Loan Problem A person obtains a $1,000, 1-year, monthly amortizing loan with a 7% APR: What is the monthly payment? $1,000 PV 12 N 7/12= 5833 V/Y OFV CPT PMT = (86.53] (Note: at "par price", coupon rate = (/Y in your calculator) How much interest is paid? Total payments: 86.53 X 12 - 1,038.36 Interest Paid: 1,038.36 - 1,000 = 38 36 A person obtains a $1,000, 1-year, monthly amortizing loan with a 7% APR. What is the monthly payment? Problem: Calculator Keys in order: PV = present value = $1,000 1000 PV N = number of payments = 12 12 N (12 months in 1 yr to get monthly) /Y = periodic interest rate = 7/12 = .5833 5833 1/Y (take annual rate to get monthly rate, take 7/12) FV = face value = 0 0 FV (when you make last pymt, you paid loan in full so there's 0 face value left) PMT = ? CPT PMT = (86.53) Make sure you clear calculator! 2nd CLR Work > 2nd CLR TVM > CE -> OFF, ON