Question

Using the simple interest method, find the monthly payments on a $3,500 installment loan if the funds are borrowed for 36 months at an annual interest rate of 9%. Use financial calculator to answer the question. Round the answer to the nearest cent.

$______ per month

Assume that interest is the only finance charge. Use financial calculator to answer the questions. How much interest would be paid on a $7,000 installment loan to be repaid in 48 monthly installments of $184.38? Round the answer to 4 decimal places.

_____ % per month

What is the APR on this loan? Round the answer to 2 decimal places. ____%

Answer 1

Solution:

a)Calculation of monthly payment

Principal amount=$3500

Simple Interest for 36 month=Pricinpal*Rate of Interest*36/12

=$3500*0.09*36/12

=$945

Thus,monthly payment is;

=(Principal+Interest)/Term of loan

=($3500+$945)/36

=$123.47

b)Calculation of Total Interest

Total payment=Monthly payment*no. of month

=$184.38*48

=$8,850.24

Total Interest=Total Payment-Principal

=$8,850.24-$7000

=$1850.24

c)Calculation of APR(assuming Simple Inetrest)

APR=(Total Interest/Principal)*12/48

=($1850.24/$7000)*12/48

=0.06608 or 6.61%