Question

Teagan wants to buy a new jacuzzi. The jacuzzi costs $2700. Teagan decides to finance the jacuzzi for 36 months at an APR of 13.5%. Determine Teagan's monthly payment. Round your answer to the nearest cent, if necessary.

Answer 1

Teagan's monthly payment for the financed jacuzzi will be approximately $91.28, calculated using the annuity payment formula for an installment loan, considering a 13.5% APR over a period of 36 months.

Step-by-step explanation:

The question asks us to calculate Teagan's monthly payment for financing a jacuzzi at a 13.5% APR over 36 months. To find the monthly payment on an installment loan, we can use the formula for the monthly payment on an annuity:

M = P * (i / (1 - (1 + i)^(-n)))

Where:

• M is the monthly payment
• P is the principal amount ($2700)
• i is the monthly interest rate (APR divided by 12 months)
• n is the number of payments (36)

First, convert the APR to a monthly rate by dividing by 12:

i = 13.5% / 12 = 1.125% per month in decimal form, i = 0.01125

Plugging the numbers into the formula:

M = 2700 * (0.01125 / (1 - (1 + 0.01125)^(-36)))

Using a calculator to do the math:

M ≈ $91.28

So, Teagan's monthly payment will be approximately $91.28.