Question

Compute the monthly payments for an add-on interest loan of $1190, with an annual interest rate of 10% and a term of 3 years. Round to nearest cent

Answer 1

Given:

The principal amount borrowed, P=$1190.

The annual interest rat, R=10%.

The number of years, N=3.

The interest on the principal amount at add on interest rate R for N years is,

`\begin{gathered} I=(PRT)/(100) \\ =(1190*10*3)/(100) \\ =357 \end{gathered}`

Now, since there are 12 months in year, the number of months in 3 years is,

`N=3*13=36`

The sum of interest and principal is to be repaid.

Each month we have to make payment. So, the monthly payment is,

`\begin{gathered} A=(P+I)/(N) \\ =(1190+357)/(36) \\ =(1547)/(36) \\ =42.972 \end{gathered}`

Therefore, the monthly payment is $42.97, rounded to the nearest cent.