Question

A sailboat costs $19,397. You pay 5% down and amortize the rest with equal monthly payments over a 8-year period. If you must pay 7.2% compounded monthly, what is your monthly payment? (round to two decimals) How much interest will you pay?

Answer 1

Down payment = 0.05 x 19387 = $969.85

Principal Loan Amount, P =19,397 – 969.85 = $18,427.15

Interest rate per period, r = 7.2% / 12 payments per year = 0.072 / 12 = 0.006

The total number of periods, n = 8 x 12 =96

where, A = payment Amount per period

Therefore each payment would be.

Monthly Payment will be $253.07

Total payment made in 8 years will be

Amount = 96 x 253.07=$24,294.72

Total interest paid is,

I = Amount – Principal borrowed = 24,294.72 – 18,427.15 = $5867.57