Question

To purchase his first car, Darren borrowed $90,000 from 1s Primer's bank at a rate of 10% per annum for 15 years. Darren is very committed to repaying this loan on a monthly basis. Calculate the amount Darren must repay the bank each month.

A) $642.64
B) $750.00
C) $825.00
D) $950.00

Answer 1

Darren must repay the bank $825.00 each month.The calculation derives a monthly payment of $825.00, ensuring Darren pays off the loan within the specified period while covering both principal and interest in each installment.""

Explanation

Darren's monthly repayment of $825.00 is calculated using the formula for the monthly payment on an amortizing loan, considering the principal amount, interest rate, and loan duration. The formula for calculating the monthly payment on a fixed-rate loan is:
`\( M = (P \cdot r \cdot (1 + r)^n)/((1 + r)^n - 1) \),`where M represents the monthly payment, P is the principal amount, r is the monthly interest rate, and n is the number of payments. Applying this formula with Darren's loan details—$90,000 principal, 10% annual interest rate, and a 15-year loan term—the monthly payment comes out to be $825.00.

Darren's monthly repayment amount is $825.00. This is calculated based on the principal amount of $90,000, an annual interest rate of 10%, and a 15-year loan term using the formula for calculating the monthly payment on an amortizing loan. The formula incorporates the loan details to determine the fixed monthly repayment amount. The calculation derives a monthly payment of $825.00, ensuring Darren pays off the loan within the specified period while covering both principal and interest in each installment.""