Answer:
Explanation:
a) We would apply the periodic interest rate formula which is expressed as
P = a/[{(1+r)^n]-1}/{r(1+r)^n}]
Where
P represents the monthly payments.
a represents the amount of the loan
r represents the annual rate.
n represents number of monthly payments. Therefore
a = $22000
r = 0.065/12 = 0.0054
n = 12 × 3 = 36
Therefore,
P = 22000/[{(1+0.0054)^36]-1}/{0.0054(1+0.0054)^36}]
22000/[{(1.0054)^36]-1}/{0.0054(1.0054)^36}]
P = 22000/{1.214 -1}/[0.0054(1.214)]
P = 22000/(0.214/0.0065556)
P = 22000/32.64
P = $674
b) The total amount that he would pay in 3 years is
674 × 36 = 24265
total interest paid over the life of the loan is
24265 - 22000 = $2265