Question

Consider the following loan. Complete parts​ (a)-(c) below.

An individual borrowed ​$66,000 at an APR of 5​%, which will be paid off with monthly payments of ​$394 for 24 years.

a. Identify the amount​ borrowed, the annual interest​ rate, the number of payments per​ year, the loan​ term, and the payment amount.

The amount borrowed is $________. The annual interest rate is ___% The Number of payments per year is ___. The loan term is ___ years

The payment amount is $______

b. How many total payments does the loan require? What is the total amount paid over the full term of the loan?

(To calculate the total number of​ payments, multiply the number of payments per​ year, n, by the loan​ term, Y. Calculate the total number of payments.)

(To calculate the total amount​ paid, multiply the total number of payments by the payment​ amount, PMT. Calculate the total amount paid.)

c. Of the total amount​ paid, what percentage is paid toward the principal and what percentage is paid for​ interest?

(To calculate the percentage paid toward the​ principal, divide the principal amount by the total amount paid. To convert the answer to a​ percent, multiply by 100 and include the​ % sign)

Answer 1

The amount borrowed is $66,000. The annual interest rate is 5%. The number of payments per year is 12. The loan term is 24 years. The payment amount is $394. The total number of payments is 288, and the total amount paid over the full term of the loan is $113,472. 58.13% is paid toward the principal.

Step-by-step explanation:

The amount borrowed is $66,000. The annual interest rate is 5%. The number of payments per year is 12. The loan term is 24 years. The payment amount is $394.

To calculate the total number of payments, multiply the number of payments per year (12) by the loan term (24 years): 12 x 24 = 288 total payments.

To calculate the total amount paid, multiply the total number of payments (288) by the payment amount ($394): 288 x 394 = $113,472 total amount paid over the full term of the loan.

To calculate the percentage paid toward the principal, divide the principal amount ($66,000) by the total amount paid ($113,472) and multiply by 100: ($66,000 / $113,472) x 100 = 58.13% paid toward the principal. The remaining percentage is paid for interest.