Question

67. Fran wants to purchase a new boat. She starts looking for a boat around $6,000. Fran creates a budget and thinks that she can afford $250 every month for 2 years. Her bank charges her 5% interest per year, compounded monthly.

1. What is the actual monthly payment for Fran’s loan?

Answer 1

So, the actual payment for the Fran's loan is $263.23.

Explanation:

Cost of boat = $6,000

Her bank charges interest per year = 5%

Let, The actual monthly payment for the Fran's loan = r

6000 = r(\frac{1-(1+\frac{0.05}{12})^-24}{\frac{0.05}{12}})

then,

r = 6000(\frac{\frac{0.05}{12}}{1-(1+\frac{0.05}{12})^-24})

r = 263.23