You borrow $20,000 to buy a boat. The loan is to be paid off in monthly installments over one year at 18% interest annually. The first payment is due one month from today. What is the amount of each monthly payment

Monthly payment = $1,833.599

Explanation:

Loan amortization is a method of loan repayment where a series of equal amount is used to offset the principal and the interest due on a loan contract.

The monthly equal amount = loan amount/annuity factor

Annuity factor = 1 - (1+r) ^ (-n)) / r

r - monthly interest rate = 18%/12 = 1.5%

n - number of months = 12 months

Annuity factor = (1 - (1.015) ^ (-12)) / 0.05

= 10.9075

Monthly payment = 20,000/10.90750521

=1,833.599

Monthly payment = $1,833.599