Question

Stacy took out a loan for $55,000 over 14 years at an APR of 4.85%. Find her monthly payment.

A) $450
B) $375
C) $500
D) $425

Answer 1

The correct option is A). To find Stacy's monthly payment, we use the formula for calculating the monthly payment on a loan: Monthly Payment = (Loan Amount * Monthly Interest Rate) / (1 - (1 + Monthly Interest Rate)^(-Number of Months)). Plugging in the values for the loan amount, interest rate, and loan duration, we find that Stacy's monthly payment is approximately $450.

Step-by-step explanation:

To find Stacy's monthly payment, we can use the formula for calculating the monthly payment on a loan:

Monthly Payment = (Loan Amount * Monthly Interest Rate) / (1 - (1 + Monthly Interest Rate)^(-Number of Months))

In this case, the loan amount is $55,000, the annual percentage rate (APR) is 4.85%, and the loan duration is 14 years. To convert the APR to a monthly interest rate, we divide it by 12. So, the monthly interest rate would be 0.0485/12 = 0.00404. With those values, we can plug them into the formula to calculate the monthly payment:

Monthly Payment = (55000 * 0.00404) / (1 - (1 + 0.00404)^(-14*12))

Calculating this formula gives us a result of approximately $450. Therefore, the correct answer is A) $450.