Question

Obtained a $3,200 installment loan for a marble floor in her foyer. The annual percentage rate is 9%. She must repay the loan in 24 months. Find the (a) monthly using the formula, (b) total amount repaid, and (c) the finance charge

Answer 1

a). The monthly payments= $158.41

b). Total amount repaid= $3,801.92

c). The finance charge= $601.92

Explanation:

Step 1

The formula for calculating the total amount she will pay is as follows;

A=P(1+r)^n

where;

A=total amount repaid

P=principal loan

r=annual interest rates

n=number of years

In our case;

P=$3,200

r=9%=9/100=0.09

n=24/12=2 years

replacing;

A=3,200(1+0.09)^2

A=3,200(1.09)^2

A=3,801.92

a). monthly payments=Amount to be repaid/total number of months

where;

Amount to be repaid=3,801.92

total number of months=24

replacing;

monthly payments=3,801.92/24=158.41

The monthly payments= $158.41

b). Total amount repaid= $3,801.92

c). The finance charge=Interest

The formula for calculating interest is;

I={P(1+r)^n}-P

where;

P(1+r)^n= $3,801.92

P= $3,200

replacing;

I=(3,801.92-3,200)=601.92

The finance charge= $601.92