find the total cost to repay a five year long bank loan with a principal of $340,000 and an interest rate of 4.5% APR. (Assume evenly-split monthly payments and monthly compound interest)

Answer 1

To find the total cost to repay the loan, we first need to calculate the monthly payment.

The formula to calculate the monthly payment for a loan is:

PMT = P[r(1 + r)^n]/[(1 + r)^n - 1]

Where:
PMT = Monthly Payment
P = Principal amount of the loan ($340,000)
r = Monthly interest rate (4.5% APR/12 = 0.375% or 0.00375)
n = Total number of payments (5 years x 12 months = 60 payments)

Using the formula:

PMT = $340,000[0.00375(1 + 0.00375)^60]/[(1 + 0.00375)^60 - 1]
PMT = $1944.33

Next, we calculate the total amount repaid over the 5 year period by multiplying the monthly payment by the number of payments:

Total amount repaid = $1944.33 x 60 = $116,659.80

Therefore, the total cost to repay a five-year long bank loan with a principal of $340,000 and an interest rate of 4.5% APR would be $116,659.80.