Math/Finance

Jasmine is taking out a small business loan for her floral shop. She plans to apply for a $30,000 loan with a 5-year term and a 3.75% interest rate. She is unsure of her expected monthly profits, so she wants to know the benefit of a smaller loan. Using the loan amortization formula, how much money would Jasmine save over the life of the loan if she were to borrow $10,000 less?

Enter your answer as a dollar amount

How do I plug it in the Formula ?????

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  1. what is your formula?

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    oobleck
  2. Monthly pay = int. rate / 12 months * cost of car after downpayment / (1-(1+ int. rate/12 months)^( - term length of loan )

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  3. the cpst of car payment is from another problem ignore that

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  4. Monthly pay = int. rate / 12 months * cost of car after downpayment / (1-(1+ int. rate/12 months)^( - term length of loan )

    what don't you get? Just plug in your numbers:
    M = 0.0375/12 * 30000/(1-(1+.0375/12)^60)
    since 5 years is 60 months

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    oobleck
  5. i = .0375/12 = .003125
    n = 5(12) = 60
    payment = p
    PV = 30000

    p(1 - 1.003125^-60)/.003125 = 30000
    p(54.6331109) = 30000
    p = 549.12

    now repeat the above calculation with a PV of 20,000
    (hint, I bet you it will be 2/3 of our first payment)

    so what is necessary to do with those answers?

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    Reiny

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