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You have just received an offer in the mail from Friendly Loans. The company is offering to loan you $4,250 with low monthly payments of $90 per month. If the interest rate on the loan is an APR of 15.3 percent compounded monthly, how long will it take for you to pay off the loan

1 Answer

5 votes

Answer:

73 months

approximately 6 years

Step-by-step explanation:

The period of time it would take to pay off the loan can be determined using excel nper function as below:

=nper(rate,pmt,-pv,fv)

rate is the interest expressed in monthly terms which is 15.3%/12

pmt is the amount payment per month i.e $90

pv is the amount of loan which is $4250

fv is the balance of the loan after all payments have been made i.e $0

=nper(15.3%/12,90,-4250,0)= 73 months

73 months/12 months=approximately 6 years

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