Where rate = Annual Percentage Rate divided by 1200
For example, an 8 % annual rate becomes .0066666666666666…

Here, the loan formula has been solved for principal.

The local bank can arrange for us to have a 10 year loan at 6 per cent interest and we know we can afford to pay $1,300.00 per month for the loan.
How much money will we be able to borrow?

1. The rate would be 6 ÷ 1,200 = .005
2. The months would be 12 × 10 = 120.
3. We can pay $1,300.00 month.
4. So the principal would be: