Mr. X wants a fridge that cost 12000.He has arrange to borrow to borrow the total purchase price from a finance company at a simple interest rate of 12% .the loan require quarterly payment for a period of 3yrs.if the first payment is due 3months after purchasing a fridge,what will be an amount on his quarterly payment on the loan.
I = PRT
I = 12,000 * 0.12 * 3
I = 4,320
12,000 + 4,320 = 16,320
16,320 / 12 = ?
To calculate the quarterly payment on the loan, we first need to determine the total amount Mr. X will be repaying over the 3-year period.
Given:
- Purchase price of the fridge: $12,000
- Simple interest rate: 12%
- Loan term: 3 years (or 12 quarters)
Step 1: Calculate the total amount to be repaid
The total amount paid back will be the original loan amount plus the interest accrued over the period.
Total Amount = Principal + Interest
The interest on a simple interest loan is calculated using the formula:
Interest = Principal x Rate x Time
In this case, the principal is $12,000, the rate is 12% (or 0.12), and the time is 3 years.
Interest = $12,000 x 0.12 x 3 = $4,320
Therefore, the total amount to be repaid is:
Total Amount = $12,000 + $4,320 = $16,320
Step 2: Calculate the quarterly payment
The quarterly payment will be the total amount divided by the number of quarters.
Quarterly Payment = Total Amount / Number of Quarters
In this case, the number of quarters is 12 (3 years multiplied by 4 quarters per year).
Quarterly Payment = $16,320 / 12 = $1,360
Thus, Mr. X will have to pay $1,360 each quarter to repay the loan.