I'm having a calculation problem for my business course.
In the problem I have :
A loan for 10,000 and I have 24 months to pay it, with 8% interest. Now the answer I was given by my teacher was $452.27. However, I cannot figure out what formula or calculation he used to calculate this amount.

The only thing that gets me close is dividing the 10,000 by 24, multiplying it by 8%, then adding 10,000 divided by 24. So the whole thing looks like this:
(10,000/24)*.08+(10,000/24)...but this only gives me 450. What am I doing wrong?

I think there is nothing wrong with your formula or logic.

Because I am getting the answer same as you ($449.99).

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Personal Finance Advice

What's wrong with both your formula and logic is the fact that you only pay 8% interest on $10,000 based on 24 months ONLY on the very first month's repayment of the loan.

Come the second month you are paying 8% interest on $9,614.39, the third month you are paying 8% interest on $9,226.22 and so on and so forth.

The interest rate and payment amount is constant but the outstanding principal balance is not.

The amoritization formula is: (1-vn)÷r, where n = number of years, v = 1÷(1+r), and r = interest rate ÷ 100.

• Principal= $10000
• Interest Rate= 8%
• Amortization Period= 2 years
• Starting month= Jan
• Starting year= 2008
• Monthly Pre-payment= $0
• Annual Pre-payment= $ 0.00

Your monthly payment will be $ 452.27

The following loan payment schedule would result for 2008 :

• Jan: Principal: $ 385.61 Interest: $ 66.67 Balance: $ 9614.39
• Feb: Principal: $ 388.18 Interest: $ 64.10 Balance: $ 9226.22
• Mar: Principal: $ 390.76 Interest: $ 61.51 Balance: $ 8835.45
• Apr: Principal: $ 393.37 Interest: $ 58.90 Balance: $ 8442.08
• May: Principal: $ 395.99 Interest: $ 56.28 Balance: $ 8046.09
• Jun: Principal: $ 398.63 Interest: $ 53.64 Balance: $ 7647.46
• Jul: Principal: $ 401.29 Interest: $ 50.98 Balance: $ 7246.17
• Aug: Principal: $ 403.97 Interest: $ 48.31 Balance: $ 6842.20
• Sep: Principal: $ 406.66 Interest: $ 45.61 Balance: $ 6435.54
• Oct: Principal: $ 409.37 Interest: $ 42.90 Balance: $ 6026.17
• Nov: Principal: $ 412.10 Interest: $ 40.17 Balance: $ 5614.08
• Dec: Principal: $ 414.85 Interest: $ 37.43 Balance: $ 5199.23

For Calendar Year 2009 (Year 2, 1 left)

Jan: Principal: $ 417.61 Interest: $ 34.66 Balance: $ 4781.62
Feb: Principal: $ 420.40 Interest: $ 31.88 Balance: $ 4361.22
Mar: Principal: $ 423.20 Interest: $ 29.07 Balance: $ 3938.03
Apr: Principal: $ 426.02 Interest: $ 26.25 Balance: $ 3512.01
May: Principal: $ 428.86 Interest: $ 23.41 Balance: $ 3083.15
Jun: Principal: $ 431.72 Interest: $ 20.55 Balance: $ 2651.43
Jul: Principal: $ 434.60 Interest: $ 17.68 Balance: $ 2216.83
Aug: Principal: $ 437.49 Interest: $ 14.78 Balance: $ 1779.34
Sep: Principal: $ 440.41 Interest: $ 11.86 Balance: $ 1338.93
Oct: Principal: $ 443.35 Interest: $ 8.93 Balance: $ 895.58
Nov: Principal: $ 446.30 Interest: $ 5.97 Balance: $ 449.28
Dec: Principal: $ 449.28 Interest: $ 3.00 Balance: $ -0.00

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Gary Spicuzza, *SAFE
Copyright 1956
No Rights Reserved
*Self Appointed Financial Expert

good work Gary

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Rolly polly turtle

I'm a teacher. My guess is that you have not looked in your textbook for what you need.

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