Question

The owner of a flower shop needs a short-term loan to tide her business over until she

completes the sale of some unused property. She asks the bank for a $25,000 six-month
loan. The bank agrees to give her the loan, but it attaches a hefty interest rate of 18 percent
Calculate the monthly payment and explain how the florist can handle taking this loan.

Answer 1

$4,541.67 per month.

Step-by-step explanation:

From the question above, we see that the interest rate is 18%, therefore:

0.18 X 25,000 = 4,500 interest for one year.

But the loan is for 6months, that's half a year, therefore we have:

4,500 / 2 = 2,250 will be paid as interest for 6months.

The total amount paid monthly will therefore be spread evenly over 6months thus:

(2,250 + 25,000) / 6 = $4,541.67 will be paid per month.

The florist can handle this loan because she wants to complete the sale of an unused property.