Find the amount of interest and the monthly payment for the loan. Purchase a living room set for $3,600 at 12% add-on interest for 2 years. (Round your monthly payment to the nearest cent.)
$_____ interest
$_____ per month
To find the amount of interest and the monthly payment for the loan, we need to first calculate the total amount to be paid back.
The formula to calculate the total amount to be paid back for a loan with add-on interest is:
Total Amount = Principal + Interest
Where,
Principal = Loan Amount
Interest = Principal * Interest Rate
Given:
Loan Amount (Principal) = $3,600
Interest Rate = 12% (expressed as a decimal: 0.12)
Loan Period = 2 years
Step 1: Calculate the Interest
Interest = Principal * Interest Rate
Interest = $3,600 * 0.12
Interest = $432
Step 2: Calculate the Total Amount
Total Amount = Principal + Interest
Total Amount = $3,600 + $432
Total Amount = $4,032
Step 3: Calculate the Monthly Payment
To calculate the monthly payment, we need to divide the total amount by the number of months in the loan period.
Loan Period = 2 years = 2 * 12 months = 24 months
Monthly Payment = Total Amount / Loan Period
Monthly Payment = $4,032 / 24
Monthly Payment ≈ $168 (rounded to the nearest cent)
Therefore, the answers are:
$432 interest
$168 per month.