A bank offers a 24-month installment loan with an APR of 10%. Alicia wishes to use the loan to finance a sailplane for $42,800. After first using Table 13-1 to find the finance charge, calculate the monthly payment.
What is the finance charge?
Working this without archaic tables, instead using modern technology .... (a basic scientific calculator)
i = .10/12 = .0083333...
n = 24
42800 = paym(1 - 1.0083333...^-24)/.0083333...
paym = 1975.00
using your tables:
42800/100 = 428
charge per 100 for 24 months = 10.75
so total interest charge = 10.75(428) = 4601
amount repayable = 42800+4601= 47401
divided into 24 payments ----47401/24 = 1975.04
compare with proper answer above.
(amount financed + finance charge)/#months of loan, same answer! thank you so much,.
To calculate the monthly payment for a 24-month installment loan with an APR of 10%, we need to find the finance charge, which is the total amount of interest paid over the entire loan period.
To find the finance charge, you mentioned using "Table 13-1." Unfortunately, without access to that table, I cannot provide the exact finance charge. However, I can explain the general concept of finding the finance charge using the APR.
Typically, the finance charge is calculated using a formula based on the Annual Percentage Rate (APR). The formula for the finance charge is:
Finance Charge = Loan Amount * (APR/100) * (Loan Period/12)
In this case, the loan amount is $42,800, the APR is 10%, and the loan period is 24 months.
Assuming you have access to Table 13-1, find the corresponding percentage value for a 24-month loan and an APR of 10%. Multiply the loan amount ($42,800) by this percentage value to obtain the finance charge.
Once you have determined the finance charge, you can calculate the monthly payment using the following formula for an installment loan:
Monthly Payment = (Loan Amount + Finance Charge) / Loan Period
Substitute the loan amount ($42,800) and the finance charge into the formula, then divide it by the loan period (24 months) to find the monthly payment.