Question

Solve the problem using the formula below.

Given a note for $1,000, with 24 equal monthly payments, and a 7.5% true annual interest rate is charged. What is the principal plus interest payment?

$___

Answer 1

The correct answer is $44.92

Explanation:

We all know you're not doing this

Answer 2

The usual formula for finding the amount A of a monthly payment on principal amount P with annual interest rate r over t years is

... A = Pr/(12·(1 -(1+r/12)^(-12t)))

Filling in P=1000, r=.075, t=2, you get

... A = 45.00

The montly payment is $45.00.

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The given formula looks nothing like one used to compute the payment, nor is it anything like a formula used to compute interest on such a loan. We cannot figure out how to use it (or if it is even applicable) without knowing the definitions of the variables involved.