You have a goal of paying off your school loans in five years. You will graduate with a loan debt if GHS20,000 at an interest rate of 6%. How much will you need to pay each month to have the debt paid off in five years? Question 1Select one: A.

To calculate the monthly payment needed to pay off a loan, we can use the formula for the monthly payment of an amortizing loan: \[ M = P \frac{r(1 + r)^n}{(1 + r)^n - 1} \] Where: - \(M\) = monthly payment - \(P\) = loan principal (amount borrowed) - \(r\) = monthly interest rate (annual interest rate divided by 12) - \(n\) = total number of payments (loan term in months) Given: - \(P = 20,000\) GHS - Annual interest rate = 6% => Monthly interest rate, \(r = \frac{0.06}{12} = 0.005\) - Loan term = 5 years => Total number of payments, \(n = 5 \times 12 = 60\) Now, substituting the values into the formula: \[ M = 20000 \cdot \frac{0.005(1 + 0.005)^{60}}{(1 + 0.005)^{60} - 1} \] Calculating \((1 + 0.005)^{60}\): \[ (1 + 0.005)^{60} \approx 1.34885 \] Now the formula becomes: \[ M = 20000 \cdot \frac{0.005 \cdot 1.34885}{1.34885 - 1} \] Calculating the terms: \[ M = 20000 \cdot \frac{0.00674425}{0.34885} \approx 20000 \cdot 0.019327 \approx 386.66 \] So, the monthly payment is approximately GHS 386.66. Thus, the correct answer is **A. GHS 386.66**.