Suppose you borrow $5,000 and make 12 equal payments to retire the debt. If the finance charge for the loan is $400, what will the amount of each monthly payment be?
To find the amount of each monthly payment, we need to calculate the loan amount plus the finance charge, and then divide it by the number of payments.
First, add the principal amount borrowed to the finance charge:
$5,000 + $400 = $5,400
Next, divide the total amount by the number of payments to get the monthly payment:
$5,400 / 12 = $450
Therefore, the amount of each monthly payment will be $450.