Question

Use the appropriate amortization formula to find (a) the monthly (n=12) payment on a loan with the given conditions and (b) the total interest that will be paid during the term of the loan.$13,600 is amortized over 9 years at an interest rate of 10.5%

Answer 1

Given :

the loan = $13,600 is amortized over 9 years at an interest rate of 10.5%

Assume simple interest

So,

$\begin{gathered} A=P+I \\ I=P\cdot r\cdot t \\ A=P+P\cdot r\cdot t \\ A=P(1+rt) \\ \end{gathered}$

P = 13,600

t = 9 years

r = 10.5% = 0.105

So,

$\begin{gathered} A=13600\cdot(1+0.105\cdot9)=13600\cdot(1+0.945) \\ A=13600\cdot1.945=26452 \end{gathered}$

The number of months to pay back the loan = 12 * 9 = 108

So, the monthly payment = 26452/108 = 244.93

Rounding to the nearest whole number

So, the

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