Joe secured a loan of 14000 four years ago from a bank for u

Joe secured a loan of $14,000 four years ago from a bank for use toward his college expenses. The bank charges interest at the rate of 3%/year compounded monthly on his loan. Now that he has graduated from college, Joe wishes to repay the loan by amortizing it through monthly payments over 11 years at the same interest rate. Find the size of the monthly payments he will be required to make. (Round your answer to the nearest cent.)

Solution

Loan Amount Grew To: 14,000(1+.03/12)^(12*4)=$15,782.59

Amortization Formula: PMT = PV [(r/m)/(1-(1+r/m)^(-mt)

Given are the below fields:

PV = 15,782.59
r = .03
m = 12
t = 11

Therefore, size of the monthly payments he will be required to pay can be denoted by PMT.

PMT = 15,782.59[(.03/12)/(1-(1+.03/12)^(-12*11) = $140.51

Hence, answer is $140.51 or $141.