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A problem is listed below. Identify its type. The Jimenez family purchased a new home. To fully furnish their new home, they took a loan from their credit union that charges 9% per year compounded monthly . The loan amount was $20,000. They wish to payoff this loan in 2 years. How much is their monthly payments? a) Sinking Fund b) Future Value with compound interest c) Amortization d) Present Value with compound interest e) Present Value of an Annuity f) None of the above.

Verified Answer :

MissPhiladelphia
AComputing for monthly amortization
A= (Pr(1+r)^n) /((1+r)^n-1)
where
P= $20000
r = 9%/12 months
   =0.75%/month= 0.0075
n= 2years*12 
   =24 payments
A= $769.42
Jimenez family will pay  $769.42 in 2 years to payoff the loaned amount

b. This problem type is called Amortization

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