Question

John and Sarah apply for a loan and each one gets $10,000 with annual interest rate of 6%. Both of them decide to pay back their loans in one year (12 months); John chooses monthly payments (12 payments) and Sarah chooses semi-monthly payments (24 poymont) to pay back their loans. How much money will John pay toward principal in his first payment ? a) $380 b) $672 $765canned with de 31 Cam Scanner

Answer 1

d.811

Explanation:

PV=A[1-1/(1+r/m)^n*m]/(r/m)

10,000=A[1-1/(1+0.06/12)^1*12]/(0.06/12)

10,000=A[1-1/(1+0.005)^12]/0.005

10,000=A(11.6189)

10,000/11.6189=A

A=860.66

so, he will pay annual amount of 860. interest with principle.

Monthly interest rate will be = 6/12=0.5%

so interest amount will be=10,000*0.5%=50.

principal amount will be=860.66-50=810.66

if we round up it will be 811.