Question

Merissa wants to borrow 12000 to purchase a used boat. After looking at her montly budget, she relaizes that all she can afford to pay per month is $250. The bank is offering a 6.1% loan. What should the length of her loan be so that she can keep her budget

Answer 1

Approximately 23 months.

Step-by-step explanation:

This can be calculated as using the Future value annuity formula i.e,

FV(annuity) = P((1+i)^n-1) / i

Hence this is calculated as:

12000 = 250 ((1 + 0.061)^n)-1) / 0.061

We calculate for 'n'.

Hence n = 23.1 approximately 2 years.

Hope this helps.

Thankyou.