Question

2. If you borrow $16,750 to buy a boat, and the bank charges 4.5% interest for 18 months, how much will you have to pay each month? Round your answer to the nearest cent. $

Answer 1

Given:

The amount of money to borrow = P = $16,750

The interest = r = 4.5% = 0.045

Time = t = 18 months = 18/12 years = 1.5 years

So, the amount of money at the end of the time = A

$\begin{gathered} A=P\cdot(1+rt) \\ A=16750\cdot(1+0.045\cdot1.5) \\ A=16750\cdot1.0675=17880.625 \end{gathered}$

This money will be divided over 18 months

so, The money paid each month =

$17880.625\div18=993.368$

rounding to the nearest cent

So, the answer will be $993.37