We have following formula to find the monthly payment
[tex]P= \frac{Ai}{1-(1+i)^{-n} }[/tex]
where P= monthly payment
i= rate per period
n= number of periods
A= amount of Loan
In the given problem we have
A=12000
n= number of years × 12 = 6×12= 72
Rate of interest =7.25%
[tex]i=\frac{rate of interest}{12}[/tex]=[tex]\frac{0.0725}{12}[/tex]
i=0.006042
now we plug the values of i , n and A in the formula
[tex]P=\frac{120000(0.006042)}{1-(1+0.006042)^{-72} }[/tex]
[tex]P=\frac{72.504}{1-(1.00602)^{-72} }[/tex]
[tex]P=\frac{72.504}{0.3519}[/tex]
P=$206.03
Hence this is true.
