This monthly payment formula_1 depends upon the monthly interest rate formula_2 (expressed as a fraction, not a percentage, i.e., divide the quoted yearly nominal percentage rate by 100 and by 12 to obtain the monthly interest rate), the number of monthly payments formula_3 called the loan's term, and the amount borrowed formula_4 known as the loan's principal; rearranging the formula for the present value of an ordinary annuity we get the formula for formula_1: