Find the amount of interest and the monthly payment for the loan. Purchase a living room set for $3,800 at 12% add-on interest for 4 years. (Round your monthly payment to the nearest cent.)
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To find the amount of interest and monthly payment for a loan, first, we need to calculate the interest amount, and then we can calculate the monthly payment.
For this loan, the purchase price of the living room set is $3,800, and the interest rate is 12% add-on interest for a period of 4 years.
Step 1: Calculate the interest amount.
To calculate the interest, we need to find what 12% of $3,800 is. In add-on interest, the interest is calculated as a percentage of the principal amount.
Interest Amount = Principal Amount * Interest Rate
Interest Amount = $3,800 * 12% = $3,800 * 0.12 = $456
So, the interest amount for this loan is $456.
Step 2: Calculate the monthly payment.
To calculate the monthly payment, we need to divide the total amount (principal + interest) by the number of months in the loan term.
Total Amount = Principal Amount + Interest Amount = $3,800 + $456 = $4,256
Number of Months = 4 years * 12 months/year = 48 months
Monthly Payment = Total Amount / Number of Months
Monthly Payment = $4,256 / 48 = $88.67 (rounded to the nearest cent)
So, the monthly payment for this loan is approximately $88.67.
In summary:
- The interest amount for the loan is $456.
- The monthly payment for the loan is approximately $88.67.
Interest = 3,800 * 0.12 * 4
Add the interest to the cost of the set. Divide by 48.