Answer: Otis should borrow the money for 60 months (5 years) so he can afford his monthly payment of $200.
Step-by-step explanation: To calculate the duration of the loan, we can use the formula:
Duration (in months) = Loan amount / Monthly payment
In this case, the loan amount is $10,000, and the monthly payment is $200. So by substituting the values, we get:
Duration (in months) = 10000 / 200 = 50
The duration of the loan is 50 months, however, the bank offers him a rate of 7.5%.
To calculate the total interest, we can use the formula:
Total Interest = Loan amount * Interest Rate * Duration (in months) / 12
The total interest is = 100007.5/10050/12 = 3750
So the Otis will have to pay an additional $3750 in interest over the course of the loan.
So, the total amount he will have to pay is 10000+3750 = 13750
And the time duration to pay this amount is 60 months ( 5 years)
Note: As per the information provided, the interest rate is not annual, it is monthly. So, it is not necessary to divide it by 12 in the interest formula. The equation should be Total Interest = Loan amount * Interest Rate * Duration (in months)