Suppose you are borrowing $25,000 and making monthly payments with 1% interest. Show that the monthly payments should equal $556.11. The key relationships are that for any month t  (Ending month t...

Suppose you are borrowing $25,000 and making monthly payments with 1% interest. Show that the monthly payments should equal $556.11. The key relationships are that for any month t

(Ending month t balance)

= (Ending month t - 1 balance)

- ((Monthly payment) - (Month t interest))


(Month t interest) = (Beginning month t balance)



(Monthly interest rate)


Of course, the ending month 60 balance must equal 0.