determine the total cost, fixed monthly payment, and the total interest paid when repaying a credit card loan of $3,500 with a 21% interest rate compounded monthly over a 24-month term.
Round the answer to the nearest dollar.
To the nearest dollar, the total cost of repaying the loan is $_____. The fixed monthly payment amount is $_____.
The total amount of interest paid is $_____.
To determine the total cost of repaying the loan, we need to calculate the monthly payment amount first using the formula for monthly payment on a loan:
Monthly Payment = (Loan Amount * Monthly Interest Rate) / (1 - (1 + Monthly Interest Rate)^(-Number of Months))
In this case, the loan amount is $3,500 and the interest rate is 21% compounded monthly, so the monthly interest rate is 21% / 12 months = 1.75%.
Monthly Payment = (3500 * 0.0175) / (1 - (1 + 0.0175)^(-24))
= 60.27
Rounding the monthly payment to the nearest dollar, the fixed monthly payment amount is $60.
The total cost of repaying the loan is the monthly payment amount multiplied by the number of months:
Total Cost = Monthly Payment * Number of Months
= 60 * 24
= $1440
The total amount of interest paid is the difference between the total cost and the loan amount:
Total Interest Paid = Total Cost - Loan Amount
= 1440 - 3500
= $2060
To the nearest dollar, the total cost of repaying the loan is $1440. The fixed monthly payment amount is $60. The total amount of interest paid is $2060.