Type of calculation: Fixed monthly payment (annuity) on
an amortizing loan.
The formula:
First convert the annual rate to a monthly rate and count the payments:
- i = annual rate / 100 / 12 (monthly rate)
- n = years × 12 (number of payments)
M = P × i / (1 − (1 + i)^(−n))
Given: P = $
20000, rate =
6%, years =
5
i =
6 / 100 / 12 =
0.005
n =
5 × 12 =
60
(1 + i)^(−n) =
0.741372
M = $
20000 ×
0.005 / (1 −
0.741372)
≈ $
386.66
Total repaid = M × n
≈ $
23199.36
Total interest = Total repaid − P = $
23199.36 − $
20000 ≈ $
3199.36 (about
16% of the amount borrowed)