A loan company charges P30 interest for a one-month loan of P1200. Find the annual interest rate they are charging. show your solution
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Robert H. asked • 04/24/15
You want to buy a $252,000 home. You plan to pay 15% as a down payment, and take out a 30 year fixed loan for the rest.
You want to buy a $252,000 home. You plan to pay 15% as a down payment, and take out a 30 year fixed loan for the rest.
a) How much is the loan amount going to be?
b) What will your monthly payments be if the interest rate is 6.1%?
c) What will your monthly payments be if the interest rate is 7.1%?
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Joseph C. answered • 04/25/15
TUTOR 5.0 (107)
Joseph, Trilingual instructor, Paso Robles, CA
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a. the loan amount will be the price - down payment = $252,000 - 30,000 = $222,000 )this number is called the Principal)
the formula to calculate the monthly payment is Payment = [ì x Principal x (1 + ì)n] / (1 + ì)n - 1
the Interest will be a decimal divided by 12 because payments will be made monthly: 6.1% = 0.061/12 = 0.00508, and n = number of payments (in this case 12 months/y x 30 y = 360)
so, our equation will be Payment = [ 0.00508 x $222000 x (1.00508)360 ] / (1.00508)360 - 1
The result of this calculation will be ≅ $1,345
Using this approach, you should be able to calculate the monthly payment for a loan at 7.1% interest.