Question

If you buy a computer directly from the manufacturer for $2,815 and agree to repay it in 60 equal installments at 2.09% interest per month on the unpaid balance, how much are you monthly payments? How much total interest will be paid?

Your monthly payment is $ ?

Round to two decimal places

The total interest paid is $ ?

Round to two decimal places

Answer 1

(a)-Monthly Loan Payment

Monthly Interest Rate (r) = 2.09% per month

Number of Months (n) = 60 Months

Loan Amount (P) = $2,815

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

= [$2,815 x {0.0209 x (1.0209)⁶⁰}] / [(1.0209)⁶⁰ – 1]

= [$2,815 x {0.0209 x 3.45933] / [3.45933 -1]

= [$2,815 x 0.07230] / 2.45933

= $82.76 per month

“Monthly Payment for the Loan = $82.76 per month”

(b)-Total Interest Paid

Total Interest Paid = Total Payments – Loan Amount

= [$82.76 x 60 Months] - $2,815

= $4,965.60 – 2,815

= $2,150.60

“Total Interest Paid = $2,150.60”