Question

Monthly payments were originally calculated to repay a $38,000 loan at 8.8% compounded monthly over a 13-year period. After one year, the debtor took advantage of an option in the loan contract to increase the loan payments by 15%. How much sooner will the loan be paid off? (Do not round intermediate calculations. Round up the number of payments.)

The loan will be paid off year(s) and month(s) sooner.

Answer 1

Solution Pj Loan amount, P interest rate, r = $ 30000 8.8% (compounded monthly 8:8 % number periods n = 13 X 12 = 156 periods monthly payments, R R= par [1 = (1+x)"] R = 38000 X 0.8 12xloo [t- [1+ 1567 38000 X 0'00 3333 [1-44+0.0073333 )* '567 R 278.666667 0 680108725 R = $ 409.73

Pga the loan is monthly payment of $ 409.73 year, debtor will pay 3x 12 In total 13 amount = $409.73 x $ 409-73x156 - = 63917.80 In one e year, he paid amount 12x 409-73 $ = $ 4.916.76 After paying la monthly payments Left to repoy =$(63917-20 $ 59001.12 monthly pay 15% monthly payments = 115 x 409.73 9916-76 Now loan m ments increased current monthly payments = 471-1995 $ 3612

Pg 3. Number y periods debtore will repay take to repay the e amount 59001.12 471.18.95 125.21739 ~ 125 because were not increashed (by 15% debtore will take 144 periods (12 years), now increased loan monthly payments he took 125 periods memory the remuning The loan will be paid off amount. 19 months Sooner The loan will be paid off a year and 7 months sooner 8612