Precision Financial Calculator

Example 3-3 A Thousand-Year Loan

An organization wants to help your family finances. This includes a loan of ten thousand dollars with a thousand year term and at an annual interest rate of 8.0%. A loan of such a long repayment term will probably never exist. But assuming it does, will you accept it? Are you happy because they give you such a long term of years to repay the loan?

[Answer: Thanks for your generosity. But I think I can make it with a 100-year term.]

[Procedure]

On the Loan calculation tab, type in 10,000 for the loan amount, 1000 for the number of years, 8.0 for the interest rate. Click the Calc button, and you get a monthly payment of $66.67. Enter different values for the number of years and you will get the following table for the monthly payment.

Loan Term Years
Monthly Payment
1
869.88
3
313.36
5
202.76
10
121.33
20
83.64
30
73.38
40
69.53
50
67.93
60
67.23
70
66.92
80
66.78
90
66.72
100
66.69
110
66.68
120
66.67
200
66.67
1000
66.67
2000
66.67

Or, you can quickly solve this question by looking at the loan payment formula. Click the F button to see the loan formulas. If the period n becomes very large, then A/P = i. Remember you need to convert the interest rate to a monthly rate since this is a monthly payment type. 8% divided by 12 equals 0.6667%. Then A = $10,000 x 0.6667% = $66.67. There is not a penny difference in the monthly payment between a 120-year and a 1000-year loan. So why should you pay 880 more years for nothing!

 

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