Question

Amy took a renovation loan of $27 000 from a finance company which charges a simple interest of 4% p.a. (a) How much interest does she have to pay if the loan period is 3 years? (b) How much is each monthly instalment?​

Answer 1

a) The interest charged on the loan can be calculated as:Interest = Principal x Rate x Time

= $27,000 x 0.04 x 3

= $3,240Therefore, Amy has to pay $3,240 in interest over the 3-year loan period.(b) The total amount to be repaid at the end of the loan period can be calculated as:Total amount = Principal + Interest

= $27,000 + $3,240

= $30,240To calculate the monthly installment, we need to divide the total amount by the number of months in the loan period. Since there are 3 years in the loan period, which is equal to 36 months, the monthly installment can be calculated as:Monthly installment = Total amount / Number of months

= $30,240 / 36

= $840Therefore, Amy has to pay $840 per month as the installment for her loan.