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6. Calculating an installment loan payment The interest rate on an installment loan may be either fixed or variable. If an installment loan has a fixed interest rate, that rate will not change over the life of the loan. The payments on a fixed-interest loan usually remain the same throughout the term of the loan. By contrast, if an installment loan has a variable interest rate, the interest fluctuates over time. With a variable-rate loan (also called an , a adjustable-rate loan), the monthly payments will go up or down, allowing the loan to be paid off by the same date as originally established loan contract. the The following table lists the monthly installment payment amounts required to repay $1,000 over various time frames and at various fixed interest rates: Monthly Installment Payments for a Loan (Principal and Interest Required to Repay $1,000) Number of Monthly Payments APR 12 24 36 48 60 72 84 5 $85.61 $43.87 $29.97 $23.03 $18.87 $16.10 $14.13 6 86.07 44.32 30.42 23.49 19.33 16.57 14.61 7 7 86.53 44.77 30.88 23.95 19.80 17.05 15.09 8 86.99 45.23 31.34 24.41 20.28 17.53 15.59 9 87.45 45.68 31.80 24.88 20.76 18.03 16.09 10 87.92 46.14 32.27 25.36 21.25 18.53 16.60 11 88.38 46.61 32.74 25.85 21.74 19.03 17.12 12 88.85 47.07 33.21 26.33 22.24 19.55 17.65 13 89.32 47.54 33.69 26.83 20.07 18.19 14 89.79 48.01 34.18 27.33 23.27 20.61 18.74 15 90.26 48.49 34.67 27.83 23.79 21.14 19.27 16 90.73 48.96 35.16 28.34 24.32 21.69 19.86 17 91.20 49.44 35.65 28.85 24.85 22.25 20.44 22.75 18 91.68 49.92 36.15 22.81 29.37 29.90 25.39 25,94 21.02 21.61 19 92.16 50.41 36.66 23.38 20 92.63 50.90 37.16 30.43 26.49 23.95 22.21 From Garman/Forgue, Apilla Instant Access for Garman/Forge's Personal Finance, 11E. 2012 Cengage Leaming. To estimate the required monthly payment amount for a fixed-rate loan, divide the borrowed amount by 1,000 and multiply the result by the appropriate figure from the table. Suppose that you are repaying an automobile loan in the amount of $15,000. The APR (annual percentage rate) on the loan is 9%, and you have ) agreed to pay back the loan in 24 monthly payments. Using the values in the preceding table, complete the following steps to calculate the required monthly payment amount for this loan. (loan amount) by Step 1: Divide the amount of the loan by 1,000. Dividing $| . 1,000 gives you a value of a Step 2: Use the APR and the number of monthly payments to identify the appropriate figure to use from the table. In this case, the APR is 9%, and the loan requires 24 monthly . , 9, payments. Therefore, the relevant amount from the table is $ Step 3: Multiply your answer from step 1 by the appropriate value from the table cell (from step 2). This gives you a required monthly payment amount of $

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