Question

Question 9 (7 points) Adam borrows $6000 for two years at an 8% annual interest rate, what is his monthly payment? A. $250 D. $522 B. $271 C.$290 E. None of these

Answer 1

B. $271

Explanation:

Given,

Present value of the loan, PV = $ 6000,

Annual rate of interest = 8 % = 0.08,

So, the monthly rate of interest, r =
`(0.08)/(12)`,

Also, time = 2 years,

So, the total number of months, n = 24,

Hence, the monthly payment would be,

`A=(PV(r))/(1-(1+r)^(-n))`

`=(6000((0.08)/(12)))/(1-(1+(0.08)/(12))^(-24))`

`=\$271.363748737`

`\approx \$271`

Option B is correct.