Question

Consider the following loan. Complete parts (a)-(c) below An individual borrowed $73,000 at an APR of 7 % , which will be paid off with monthly payments of $595 for 18 years. a. Identify the amount borrowed, the annual interest rate, the number of payments per year, the loan term, and the payment amount. The amount borrowed is $ the annual interest rate is the number of payments per year is the loan term is years, and the payment amount is $ b. How many total payments does the loan require? What is the total amount paid over the full term of the loan? There are payments toward the loan and the total amount paid is $ c. Of the total amount paid, what percentage is paid toward the principal and what percentage is paid for interest? The percentage paid toward the principal is% and the percentage paid for interest is (Round to the nearest tenth as needed.)

Answer 1

a.

The amount borrowed is $ 73,000

The annual interest rate is 7 %

The number of payments per year is 12

The loan term is 18 years

Payment amount is $ 595

b.

Total payment required = Number of payment annually x loan term = 12 x 18 = 216

Total amount paid = Total payment required x Payment amount = 216 x $ 595 = $ 128,520

There are 216 payments towards the loan and the total amount paid is $ 128,520

c.

Total interest paid = Total amount paid – Amount borrowed = $ 128,520 - $ 73,000 = $ 55,520

% paid towards principal = Principal amount/Total amount paid

                                       = $ 73,000/$ 128,520 = 0.56800497976969 or 56.80 %

% paid for interest = Interest paid/Total amount paid

                              = $ 55,520/$ 128,520 = 0.431995020230314 or 43.20 %

The percentage paid toward the principal is 56.80 % and percentage paid for interest is 43.20 %