Question

Justine borrowed money to purchase an RV for $120,000 and will repay the loan quarterly over the next eight years. How much will be her quarterly payments if she pays a nominal interest rate of 8 percent per year?

Answer 1

$7,067.03

Step-by-step explanation:

The formula for compound interest is

A (final amount) = P(1+r/n)^nt where P is the principal amount, r is the interest rate, n is number of times interest applied per time period and t = number of time periods elapsed

therefore using our formula A = 120,000(1+8/4)^4*8 = $226,144.87

Therefore total amount to be paid divided by 8 years then divided by 4 quarterly payments = $226,144.87/8years = $28,268.11 per year then we divide by 4 to get her quarterly payment amount = $28,268.11/4 = $7,067.03