Question

Mrs. Siebenaller bought a bus for 25,000 with a 7% interest rate mrs s gets a loan payoff of 60 months how much interest would she pay

Answer 1

`\$4701.80`

Explanation:

Mrs. Siebenaller bought a bus for 25,000 with a 7% interest rate and she gets a loan payoff of 60 months,

We know that,

`\text{PV of annuity}=P\left[(1-(1+r)^(-n))/(r)\right]`

Where,

PV = Present value of annuity = 25000,

r = rate of interest of each period =
`(7)/(12)`% monthly

n = number of periods = 60 months,

Putting the values,

`\Rightarrow 25000=P\left[(1-(1+(0.07)/(12))^(-60))/((0.07)/(12))\right]`

`\Rightarrow P=(25000)/(\left[(1-(1+(0.07)/(12))^(-60))/((0.07)/(12))\right])`

`\Rightarrow P=\$495.03`

Hence total amount paid is,

`=495.03* 60=\$29,701.80`

Therefore interest amount is,

`=29,701.80-25,000=\$4701.80`