Question

Rodrigo applied for a $14,000 loan at an interest rate of 5.4% for 6 years. Use the monthly payment formula to complete the statement. M = M = monthly payment P = principal r = interest rate t = number of years

Answer 1

The correct answers are monthly payment: $228.08 and total finance charge: $2,421.76.

Explanation:

Using formula

M = [(P(r/12)(1 + r/12)^12t) / (1 + r/12)^12t] - 1

M = monthly payment

P = principal

r = interest rate

t = number of years

The monthly payment is $228.08. For 6 years, the loan period is for 72 months. $228.08 x 72 = $16,421.76

So the total finance charge is $16,421.76 - $14,000 = $2,421.76.

Answer 2

A= $19354.71

At the end of 6 years

Explanation:

$14,000 loan at an interest rate of 5.4% for 6 years.

Amount to be paid at the end of the six years is

A= p(1+r/n)^(nt)

P= $14000

r= 0.054

t = 6

n = 6*12 = 72

A= 14000(1+0.054/72)^(72*6)

A= 14000(1+ 0.00075)^(432)

A= 14000(1.00075)^(432)

A= 14000(1.38247941)

A= 19354.71

A= $19354.71