Precision Financial Calculator Precision Financial CalculatorAn organization wants to help your family finances. This includes a loan of ten thousand dollars with a thousand year term and at an annual interest rate of 8.0%. A loan of such a long repayment term will probably never exist. But assuming it does, will you accept it? Are you happy because they give you such a long term of years to repay the loan?
[Answer: Thanks for your generosity. But I think I can make it with a 100-year term.]
[Procedure]
On the Loan calculation tab, type in 10,000 for the loan amount, 1000 for the number of years, 8.0 for the interest rate. Click the Calc button, and you get a monthly payment of $66.67. Enter different values for the number of years and you will get the following table for the monthly payment.
|
Loan
Term Years
|
Monthly
Payment
|
|---|---|
|
1
|
869.88
|
|
3
|
313.36
|
|
5
|
202.76
|
|
10
|
121.33
|
|
20
|
83.64
|
|
30
|
73.38
|
|
40
|
69.53
|
|
50
|
67.93
|
|
60
|
67.23
|
|
70
|
66.92
|
|
80
|
66.78
|
|
90
|
66.72
|
|
100
|
66.69
|
|
110
|
66.68
|
|
120
|
66.67
|
|
200
|
66.67
|
|
1000
|
66.67
|
|
2000
|
66.67
|
Or, you can quickly solve this question by looking at the loan payment formula. Click the F button to see the loan formulas. If the period n becomes very large, then A/P = i. Remember you need to convert the interest rate to a monthly rate since this is a monthly payment type. 8% divided by 12 equals 0.6667%. Then A = $10,000 x 0.6667% = $66.67. There is not a penny difference in the monthly payment between a 120-year and a 1000-year loan. So why should you pay 880 more years for nothing!