Quiz 2.2.3 – What is the Average Payment?


Figure out the average monthly payments for two purchases made with loans using the amortization calculation formula.

Alternatives: Do your own amortization calculations using spreadsheet software* or generate an amortization payment chart by using an online financial calculator.

Amortization Calculation Formula

A = payment amount

P (aka pv) = principal (the present value of the loan)

R = interest rate, per period (decimal number)

N = total number of payments over which the loan will be repaid

DescriptionPresent Value of Loan (pv)Annual Interest Rate (APR)Interest Rate Per Period (r)Number of Payments (n)Payment Amount
Total Amount to be Repaid
Cash Loan
$10040.0%40% / 12 = $3.33%6$18.66$18.66 x 6 = $111.96
Big-Screen TV$7007.0%7% / 12 = .58%24
College Loan$12,0003.5%3.5% / 12 = .29%180

*See Microsoft Excel File, “Amortization Calculation”