math

A person takes out a monthly installment loan of $2000 with an annual percentage rate of 13.0% if the person can afford no more than $70 per month, then which of the following terms are feasible? a) 8 months b ) 12 months c) 18 months d) 24 months e) 36 months

asked by MathHelp
  1. Massaging the formula for the monthly payment

    M = Pr/(1-(1+r)^-n) gives

    n = log(M/(M-Pr)) / log(1+r)

    With r = .13/12 = 0.010833333
    M = 70
    P = 2000

    M/(M-Pr) = 70/(70 - 2000 * 0.01083333) = 1.448

    log 1.448/log 1.010803333 = 34.3, so the 36 month term looks good.


    You can also ballpark this by estimating:

    13%/year is about 1%/month. 1% of 2000 is 20.
    So, the payments start out with $20 interest, leaving $50 going to principal.

    2000/50 = 40, which is bigger than 36, but later payments include less interest, so the term would be less than 40. 36 is the best choice.

    posted by Steve

Respond to this Question

First Name

Your Response

Similar Questions

  1. SOMEBODY HELP ME WITH MATH!!!!!!

    A person wishes to borrow $20,000 and has the following options. One lending source offers the loan for 24 monthly payments at an annual percentage rate of 14%. The second source offers the loan for 18 monthly payments at an
  2. math

    Cassandra is repaying an installment loan of $3,500 with 20 equal monthly payments of $196 each. What is the annual percentage rate of the loan?
  3. Business Math

    Cassandra is repaying an installment loan of $3,500 with 20 equal monthly payments of $196 each. what is the annual percentage rate of the loan?
  4. Business Finance

    Cassandra is repaying an installment loan of $3500 with 20 equal monthly payments of $196 each. What is the annual percentage rate of the loan?
  5. eco

    Suppose a person pays $80 of annual interest on a loan that has a 5 percent annual interest rate. The loan amount is: A. $400. B. $1,600. C. $160. D. $85. 10. Suppose a loan customer is considering two alternative $22,000 loans.
  6. Math

    Find the annual percentage rate on a loan of $1,500 for 18 months if the loan requires $190 interest and is repaid monthly.
  7. math

    Nick would like to purchase a vacation timeshare, but he can only afford a $350 monthly loan payment. He wants the loan to extend 20 years, and the annual interest rate is 6%. How much money will Nick need to borrow if he repays
  8. Maths

    a loan of 2000 is being amortized over 48 months at a interest rate of 12 peecent compounded monthly, the outstanding loan at the beginning of 36 month is ?
  9. consumer math

    Nikki borrowed $500 at 9% interest for 12 months under a monthly installment plan. She must pay $8.7453 per $100 each month for 12 months. How much is her monthly installment payment?
  10. math

    Cassandra is repaying an installment loan of 3,500 with 20 equal payments of 196.00 each.What is the annual percentage rate of the loan? A. 7.55% B.11.16% c 12% d.13.25%

More Similar Questions