Question

Marci has taken out a loan of $5,000 for a term of 24 months (2 years) at an interest rate of 8.5%. Use the amortization table provided to

complete the statement.
Monthly Payment per $1,000 of Principal
Rate | 1 Year 2 Years 3 Years 4 Years 5 Years
6.5% $86.30 $44.55 $59.35 $23.71 $19.57
7.0% $86.53 $44.77 $31.88 $23.95 $19.80
7.5% $86.76 $45.00 $51.71 $24.18 $20.04
8.0% $86.99 $45.23 $31.34 $24.41 $20.28
8.5% $87.22 $45.46 $24.65 $24.65 $20.52
9.0% $87.45 $45.68 $31.80 $24.89 $20.76
Marci's monthly payment will be $
and her total finance charge over the course of the loan will be $​

Answer 1

• $227.30
• $455.20

Explanation:

The table tells you that Marci's monthly payment on a 2-year loan at 8.5% will be $45.46 on each $1000 borrowed. For her $5000 loan, her monthly payment will be 5 times the table value, or ...

monthly payment = $5000/$1000 × $45.46

monthly payment = $227.30

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Her total of 24 payments will be ...

total repaid = 24 × $227.30 = $5,445.20

That amount is $445.20 more than the amount borrowed, so that is Marci's finance charge.

__

Marci's monthly payment will be $227.30, and her total finance charge will be $455.20.