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Exercise

From yearly to monthly interest rate

Cynthia's parents want to invest in real estate for their daughter and will borrow a capital of 125,000 EUR to finance an apartment. A local bank provides mortgage loans at a yearly interest rate of 3.04%. The parents want to pay back the loan with fixed monthly payments over the next 20 years.

Can you derive how high these monthly payments will be?

In this first exercise you will focus on the transition from yearly to monthly interest rate.

Instructions
100 XP
  • Define number_payments as the number of payments to be made. The loan will be paid back using monthly mortgage payments over a time period of 20 years.
  • Set i equal to the yearly nominal interest rate of 3.04%, hence 0.0304.
  • Calculate the monthly interest rate monthly_interest from the yearly interest rate i.