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Tony borrows $1400 at an annual interest rate of 6.0%. He receives the loan on the first day of the current month and will make monthly payments on the first day of each of the following months until the
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29 votes
29 votes
Tony borrows $1400 at an annual interest rate of 6.0%. He receives the loan on the first day of the current month and will make monthly payments on the first day of each of the following months until the loan is repaid after 24 months (2-year loan). The monthly loan payment is $62.05. How much interest will Tony pay as part of the first loan payment

User Amy G
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1 Answer

6 votes
6 votes

Answer:

Interest due on the first loan repayment= $7

Step-by-step explanation:

Loan Amortization: A loan repayment method structured such that a series of equal periodic installments will be paid for certain number of periods to offset both the loan principal amount and the accrued interest.

The monthly periodic equal instalment is $62.05 which consists of the principal and the interest due.

To ascertain the interest portion of the loan , we will compute the interest due for the first month using the annual interest rate and the principal amount.

Interest due for the first month = 6.0%× 1,400 × 1/12 = $7

Interest due on the first loan repayment= $7

User Neil Coffey
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