Question

Use the add-on method of calculating interest to find the total interest and the monthly payment of a $1000 loan for 21 months at

8.9%

Answer 1

Given:

Loan amount =$1000

Rate =8.9%

Time =21 months,

`\begin{gathered} 1\text{ year =12 months} \\ 21\text{ months=}(21)/(12)=1.75\text{ years} \end{gathered}`

First calculate the total interest,

`\begin{gathered} I=(P* R* T)/(100) \\ I=(1000*8.9*1.75)/(100) \\ I=155.75 \end{gathered}`

Answer: Total interest is $155.75.

The monthly payment is calculated as,

`\text{Monthly payment=}\frac{\text{P+I}}{total\text{ number of payments}}=(1000+155.75)/(21)=55.04`

Answer: monthly payment is $55.04.