Question

#6 - Calculate the monthly payment necessary to retire the following loan

amount is simple interest is charged on the rate.
• Loan Amount: $4500
Rate: 10%
• Time: 3 years
Select the correct answer from each dropdown menu.
A) Interest Owed: $ (Select]
B) Maturity Value: $ (Select]
C) Monthly Payment: $ [Select]

Answer 1

9514 1404 393

Answer:

A) $1350

B) $5850

C) $162.50

Explanation:

A) The interest is given by the formula ...

I = Prt

where P is the principal amount, r is the interest rate, and t is the number of years.

I = $4500×0.10×3 = $1350

The interest owed is $1350.

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B) At maturity, the principal and interest are due. That amount is ...

$4500 +1350 = $5850

The maturity value is $5850.

__

C) If the maturity value is paid in 36 equal monthly installments, each is ...

$5850/36 = $162.50

The monthly payment is $162.50.