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 ?????
answer plz
Jesus christ they think we have time to do all this math, just give us the freaking answer so I can move on with my day.
what is your formula?
Monthly pay = int. rate / 12 months * cost of car after downpayment / (1-(1+ int. rate/12 months)^( - term length of loan )
the cpst of car payment is from another problem ignore that
$549.12
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?
To calculate the benefit of a smaller loan using the loan amortization formula, you can follow these steps:
1. Determine the loan details: In this case, Jasmine plans to apply for a $30,000 loan with a 5-year term and a 3.75% interest rate.
2. Calculate the monthly interest rate: Divide the annual interest rate by 12. In this case, the monthly interest rate would be (3.75% / 100) / 12 = 0.003125.
3. Calculate the number of months in the loan term: Multiply the number of years by 12. In this case, the loan term is 5 years, so the number of months would be 5 * 12 = 60 months.
4. Determine the monthly payment for the original loan: Use the loan amortization formula to calculate the monthly payment. The formula is:
P = (r * PV) / (1 - (1 + r)^(-n))
Where:
P = monthly payment
r = monthly interest rate
PV = present value (loan amount)
n = number of months
For the original loan of $30,000:
P = (0.003125 * 30000) / (1 - (1 + 0.003125)^(-60))
≈ $539.16
5. Determine the monthly payment for the smaller loan: Following the same steps, calculate the monthly payment for a loan amount that is $10,000 less, i.e., $20,000.
For the smaller loan of $20,000:
P = (0.003125 * 20000) / (1 - (1 + 0.003125)^(-60))
≈ $359.44
6. Calculate the savings: Finally, subtract the monthly payment for the smaller loan from the monthly payment for the original loan, and then multiply the result by the number of months.
Savings = (Monthly payment for the original loan - Monthly payment for the smaller loan) * Number of months
= ($539.16 - $359.44) * 60
≈ $10,770.00
Therefore, Jasmine would save approximately $10,770 over the life of the loan if she were to borrow $10,000 less.
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