The Flemings secured a bank loan of $368,000 to help finance the purchase of a house. The bank charges interest at a rate of 4%/year on the unpaid balance, and interest computations are made at the end of each month. The Flemings have agreed to repay the loan in equal monthly installments over 25 years. What should be the size of each repayment if the loan is to be amortized at the end of the term? (Round your answer to the nearest cent.)

To find the size of the monthly repayment for the Flemings' loan, we can use the formula for amortizing a loan:

\[
M = P \times \frac{r(1 + r)^n}{(1 + r)^n - 1}
\]

Where:
- $M$ is the monthly payment.
- $P$ is the principal (the initial loan amount), which is \$368,000.
- $r$ is the monthly interest rate. Since the annual interest rate is 4%, the monthly rate is $r = \frac{0.04}{12} = 0.003333$.
- $n$ is the total number of payments. Since the loan term is 25 years, and payments are made monthly, $n = 25 \times 12 = 300$.

Let's calculate the monthly payment $M$.The size of each monthly repayment should be approximately **$1,942.44** to amortize the loan at the end of the 25-year term.

Would you like more details, or do you have any questions?

Here are some related questions to expand your understanding:
1. What is the total amount paid over the entire loan term?
2. How much interest is paid over the 25 years?
3. How would a higher interest rate affect the monthly payments?
4. What if the loan term was 30 years instead of 25 years?
5. How do bi-weekly payments impact loan amortization?

**Tip:** Paying extra toward the principal each month can reduce the overall interest paid and shorten the loan term.

The Flemings secured a bank loan of $368,000 to help finance the purchase of a house. The bank charges interest at a rate of 4%/year on the unpaid balance, and interest computations are made at the end of each month. The Flemings have agreed to repay the loan in equal monthly installments over 25 years. What should be the size of each repayment if the loan is to be amortized at the end of the term? (Round your answer to the nearest cent.)

Learn how to calculate the monthly repayment for a $368,000 loan with a 4% annual interest rate amortized over 25 years. This step-by-step solution uses the loan amortization formula to determine the monthly payment, approximately $1,942.44.

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