Determine the total cost, fixed monthly payment, and the total interest paid when repaying a credit card loan of $3,500 with a 21% interest rate compounded monthly over a 24-month term. Round the answer to the nearest dollar.
The total cost of the loan can be found by adding the principal amount (loan amount) to the total interest paid.
The total interest paid can be found using the formula:
Total Interest = Principal Amount * Interest Rate * Time
In this case, the principal amount is $3,500, the interest rate is 21% (or 0.21), and the time is 24 months.
Total Interest = $3,500 * 0.21 * 24 = $14,700
Therefore, the total cost of the loan is $3,500 + $14,700 = $18,200.
The fixed monthly payment can be found by dividing the total cost by the number of months.
Fixed Monthly Payment = Total Cost / Number of Months
Fixed Monthly Payment = $18,200 / 24 = $758.33
Finally, the total interest paid is $14,700.
Using a calculator, determine the total cost, fixed monthly payment, and the total interest paid when repaying a credit card loan of $3,500 with a 21% interest rate compounded monthly over a 24-month term. Round the answer to the nearest dollar.
To determine the total cost, fixed monthly payment, and total interest paid, we can use the formula for calculating the monthly payment on a loan:
Monthly Payment = (Principal Amount * Monthly Interest Rate) / (1 - (1 + Monthly Interest Rate) ^ -Number of Months)
where
Principal Amount = $3,500
Annual Interest Rate = 21%
Monthly Interest Rate = Annual Interest Rate / 12
Number of Months = 24
First, let's calculate the Monthly Interest Rate:
Monthly Interest Rate = 21% / 12 = 0.0175
Now, let's calculate the Monthly Payment:
Monthly Payment = (3500 * 0.0175) / (1 - (1 + 0.0175) ^ -24)
Monthly Payment ≈ $181.15
The fixed monthly payment is $181.15.
To find the Total Cost, we can calculate:
Total Cost = Monthly Payment * Number of Months
Total Cost = $181.15 * 24
Total Cost ≈ $4,354
The total cost of the loan is approximately $4,354.
Lastly, to calculate the Total Interest Paid, we can subtract the Principal Amount from the Total Cost:
Total Interest Paid = Total Cost - Principal Amount
Total Interest Paid = $4,354 - $3,500
Total Interest Paid ≈ $854
The total interest paid on the loan is approximately $854.