Question 1
Multiple Choice
Confidence Level
0%
A consumer finances a new home theater system with a loan of €12,000. The loan is to be repaid over 4 years with equal monthly payments and carries a nominal annual interest rate of 6%, compounded monthly. The monthly payment is closest to:
Explanation
We are solving for the monthly PMT (payment) on a fully amortizing loan.
Given:
PV = €12,000
N = 4 years × 12 months = 48
I/Y = 6% annual ÷ 12 months = 0.5 It is important to note that since the interest rate is nominal, it must be divided by 12 to find a monthly periodic rate.
FV = 0 (loan is fully paid off)
PMT = ?
BA II Plus Calculator Steps:
Press 2nd → FV to clear TVM values
Input:
N = 48
I/Y = 0.5
PV = 12000
FV = 0
PMT = ?
Press CPT → PMT
Result: −282.55
(The negative sign indicates a cash outflow—i.e., the payment you make.)