Question

Darnelle has a $10,000, three-year loan with an APR of 5%. She uses the table below to compute information on the loan.

a. What is her monthly payment?

b. What is the total of all her monthly payments?

c. What is the total finance charge?

Answer 1

Given data
Principal = $10.000
Rate= 5 %= 0.05
Time = 6years (Assume)
A = p(1+rt)
A = 10.000/1+0.05×6)
A = 10,000(1+0.30)
A = 10.000/1.30)
A = 13.000
So the final amount for simple interest is $13,000
To determine her monthly payment
Given that it is spread over 6 years
There are 12×6 months= 72months
So monthly pay = 10000/72 = $180.56
The total of all her monthly payments would be $13,000 which is equal to the
final amount.

So the final amount for simple interest is $13,000
To determine her monthly payment
Given that it is spread over 6 years
There are 12×6 months= 72months
So monthly pay = 10000/72 = $180.56
The total of all her monthly payments would be $13,000 which is equal to the
final amount.
The finance charge is equal to the interest.
- $13.000 - $10.000 = $3000
So the finance charge would be $3000.
Therefore, her monthly payment would be $180.56, the total of all her
monthly payments would be $13,000 and the total finance charge is $3000

Answer 2

a. Darnelle's monthly payment is $299.71.

b. The total of all her monthly payments is $10,789.56.

c. The total finance charge is $789.56.

a. What is her monthly payment?

To compute Darnelle's monthly payment, we can use the following formula:

Monthly payment = (Loan amount * Interest rate * (1 + Interest rate)^Loan term) / ((1 + Interest rate)^Loan term - 1)

Where:

* Loan amount = $10,000

* Interest rate = 5% / 12 = 0.42% per month

* Loan term = 3 years * 12 months = 36 months

Substituting the values into the formula, we get:

Monthly payment = ($10,000 * 0.42% * (1 + 0.42%)^36) / ((1 + 0.42%)^36 - 1)

Monthly payment = $299.71

b. What is the total of all her monthly payments?

To compute the total of all Darnelle's monthly payments, we can simply multiply her monthly payment by the number of months in her loan term:

Total payments = Monthly payment * Number of months in loan term

Total payments = $299.71/month * 36 months = $10,789.56**

c. What is the total finance charge?

The total finance charge is the difference between the total amount Darnelle will repay on the loan and the original loan amount. To compute the total finance charge, we can use the following formula:

Total finance charge = Total payments - Loan amount

Total finance charge = $10,789.56 - $10,000 = $789.56