Question

If you buy a computer directly from the manufacturer for $ 2 comma 237 and agree to repay it in 60 equal installments at 1.88 % interest per month on the unpaid​ balance, how much are your monthly​ payments? How much total interest will be​ paid?

Answer 1

The monthly​ payments to be made is $62.50. The total interest that will be paid is $1,513.

Explanation:

The formula to compute the monthly payment is:

`A=P* [(i(1+i)^(n))/((1+i)^(n)-1)]`

Here,

A = periodic payment

P = principal amount borrowed

i = periodic interest rate

n = number of periods

The information provided is:

P = $2,237

i = 1.88% = 0.0188

n = 60

Compute the value of A as follows:

`A=P* [(i(1+i)^(n))/((1+i)^(n)-1)]`

`=2237* [(0.0188(1+0.0188)^(60))/((1+0.0188)^(60)-1)]`

`=2237* 0.02794\\=62.50178\\\approx \$62.50`

Thus, the monthly​ payments to be made is $62.50.

The formula to compute the total interest that will be paid is:

`Interest=(A* n)-P`

Compute the total interest that will be paid as follows:

`Interest=(A* n)-P`

`=(62.50* 60)-2237\\=3750-2237\\=1513`

Thus, the total interest that will be paid is $1,513.