63.0k views
4 votes
Emma has taken out a loan of $ 2,000,000. She pays $ 11,000 a month. This amount only covers the interest on her loan, so she continues to owe the bank $ 2,000,000. What is the simple annual interest rate? After paying a monthly installment of $ 11,000 for 20 years, she repays the loan. How many dollars has she paid in 20 years?

User Jens Alfke
by
7.9k points

1 Answer

6 votes

We are given the Principal(P) = $2,000,000, Interest(I) = $11,000 for a month(T) = 1/12 Years;

From the question, we are asked to find the Simple Interest Rate;

Recall that


SI=P* R* T

If we make R the subject of formula, we would get;


R=(SI)/(P* T)

substituting the values of SI, P and T, we would get;


R=(11000)/(2000000*(1)/(12))=6.6\%

following the question further, Emma made the payment of $11000 monthly(let's take that as the new Simple Interest) for 20 years(which is the new T). If we use the rate R = 6.6%, we can use the formula for SImple Interest to calculate to calulate the Principal.

That is, if


\begin{gathered} SI=P* R* T \\ P=(SI)/(R* T) \end{gathered}

substituting the values of SI, R, and T, we would get;


P=(11000)/((6.6)/(100)*20)=8333.33

We can conclude that Emma has paid $8333.33 for 20 years.

User Bbbonthemoon
by
9.1k points

No related questions found

Welcome to QAmmunity.org, where you can ask questions and receive answers from other members of our community.

9.4m questions

12.2m answers

Categories