What is the monthly payment on a $100,000 loan at an interest rate of 5% for 30 years?

To determine the correct monthly payment on a loan using the formula for a fixed-rate mortgage, apply the mortgage payment formula:

M = P [r(1 + r)^n] / [(1 + r)^n – 1]

where:

• M is the total monthly mortgage payment.
• P is the principal loan amount ($100,000 in this case).
• r is the monthly interest rate (annual rate divided by 12 months).
• n is the number of payments (loan term in months).

In this situation, the interest rate of 5% annually converts to a monthly interest rate by dividing by 12, resulting in approximately 0.004167. The loan term of 30 years equates to 360 monthly payments.

Putting these values into the formula: M = 100,000 [0.004167(1 + 0.004167)^360] / [(1 + 0.004167)^360 – 1]

Calculating further, (1 + 0.004167)^360 yields about 4.46774. Thus, the equation simplifies to: M = 100,000 [0.004167 * 4.46774] / [4.46774 –