if i barrow $3000 at a bank for 12% simple interest for 18 months how much are my monthly payments?
I don't think any bank in 2014 would use simple interest, but anyway ....
interest = 3000(18/12)(.12) = $540
(here is where the flaw comes in using simple interest. The $540 would be the simple interest on the full amount of $3000, but the balance is constantly decreasing since you are making payments)
Payment = (3000+540)/18 = $196.67
ACTUAL payment should be:
paym( 1 - 1.01)^-18)/.01 = 3000
payment = $182.95
With a payment of $196.67, the effective interest rate is closer to 21.6%
To calculate the monthly payments on a loan with simple interest, you will need to use the formula:
Monthly Payment = (Principal + (Principal × Interest Rate × Time)) ÷ Number of Payments
In this case, the principal amount is $3000, the interest rate is 12% (0.12 as a decimal), and the time is 18 months. The number of payments will be the number of months.
Let's calculate the monthly payments step by step:
Step 1: Convert the interest rate to a decimal:
Interest Rate = 12% = 0.12 (as a decimal)
Step 2: Determine the number of payments:
Number of Payments = 18 months
Step 3: Plug in the values into the formula and calculate:
Monthly Payment = (3000 + (3000 × 0.12 × 18)) ÷ 18
Monthly Payment = (3000 + 648) ÷ 18
Monthly Payment = 3648 ÷ 18
Monthly Payment ≈ $202.67
Therefore, the monthly payments for a $3000 loan with a 12% simple interest rate for 18 months will be approximately $202.67.