Question

Try Again (c): Your answer is incorrect. Ashley borrowed money from an online lending company to invest in antiques. She took out a personal, amortized loan for $24,500, at an interest rate of 7.2%, with monthly payments for a term of 1 year. For each part, do not round any intermediate computations and round your final answers to the nearest cent. If necessary, refer to the list of financial formulas. (a) Find Ashley's monthly payment. 5 ? $2,122.16 (6) Ir Ashley pays the monthly payment each month for the full term, find her total amount to repay the loan. $25,465.98 (C) If Ashley pays the monthly payment each month for the full term, find the total amount of interest she will pay. $956.98

Answer 1

The formula of present value (PV) of annuity (A) should be used here.

a.

PV = 24,500

Rate of interest = r = 0.072

Number of year = n = 1

Number of months in a year = m = 12

A =?

PV = {A / (r/m)} [1 – {1 + (r/m)} ^ - (n × m)]

24,500 = {A / (0.072/12)} [1 – {1 + (0.072/12)} ^ - (1 × 12)]

24,500 = (A / 0.006) [1 – (1.006) ^ - 12]

24,500 × 0.006 = A [1 – (1 / 1.006^12)]

147 = A [1 – (1 / 1.07442416772)]

147 = A [1 – 0.93073111164]

147 = A × 0.06926888836

147 / 0.06926888836 = A

A = 2,122.16 (Answer)

b.

Total payments = A × m

                            = 2,122.16 × 12

                            = 25,465.92 (Answer)

c.

Total interest = Total payments – PV

                        = 25,465.92 – 24,500

                        = 965.92 (Answer)