Question

Please help I am doing test ! A woman borrows $4,000 at 9% compounded monthly, which is to be amortized over 3 years in equal monthly payments. for tax purposes, she needs to know the amount of interest paid during each year of the loan. find the interest paid during the first year, the second year, and the third year of the loan. [hint: find the unpaid balance after 12 payments and after 24 payments.

Answer 1

Monthly Loan Payment

Loan Amount (P) = $6,000

Monthly Interest Rate (n) = 0.75% per month [9.00% / 12 Months]

Number of months (n) = 36 Months [3 Years x 12 months]

Monthly Loan Payment = [P x {r (1+r)n} ] / [( 1+r)n – 1]

= [$6,000 x {0.0075 x (1 + 0.0075)36}] / [(1 + 0.0075)36 – 1]

= [$6,000 x {0.0075 x 1.308645}] / [1.308645 – 1]

= [$6,000 x 0.009815] / 0.308645

= $58.89 / 0.308645

= $190.80

Monthly Loan Amortization Schedule

“Therefore, the total interest paid during the first year will be $465.99”

HOPE this example helps