Question

An amount of $27,000 is borrowed for 11 years at 8.25%

interest, compounded annually. If the loan is paid in full at the end of that period, how much must be paid back?
Use the calculator provided and round your answer to the nearest dollar.

Answer 1

There is a formula for calculating the TOTAL amount paid for a loan. (See attached).
r = monthly loan rate = 8.25 / 1,200 = 0.006875
p = principal = 27,000
n = number of payments = 11 years*12 months = 132
TOTAL Loan Cost = 0.006875 * 27,000 * 132 / 1 -(1.006875)^-132
TOTAL Loan Cost = 24,502.5 / (1 - 0.4047868312 )
TOTAL Loan Cost = 24,502.5 / 0.5952131688
TOTAL Loan Cost = 41,165.92