Question

The following formula is used to calculate the monthly payment on a personal loan. P = P V times StartFraction i over 1 minus (1 + i) superscript negative n EndFraction In this formula, n represents the _____ . a. number of periods over which interest is calculated on the loan b. number of applicants for the loan c. number of years it will take to pay the loan back d. number of dollars the loan is for

Answer 1

to sum it up its A

Explanation:

Answer 2

• a. number of periods over which interest is calculated on the loan

Explanation:

The equation is:

`P = PV* (i)/(1-(1 + i)^(-n))`

Where,

• PV is the present value or the amount of the loan.

• i is the interest rate per period and is calculated dividing the yearly percent rate by 100 and by the number of periods in a year.

• n is the total number of periods and is calculated as the product of the number of periods in a year times the number of years.

For example, to calculate the montly payment of a $30,000 loan to be paid in 10 years, at 8% compounded monthly, you use>

• PV = 30,000

• i = (8 /100) / (12) = 0.08/12 ≈ 0.006667

• n = 10 years × 12 months/year = 120 months = 120 periods.

Hence, n represents number of periods over which interest is calculated on the loan.