The owner of a flower shop needs a short-term loan to tide her business over until she completes the sale of some unused property. She asks the bank for a $25,000 six-month loan. The bank agrees to give her the loan, but attaches a hefty interest rate of 18 percent. Calculate the monthly payment, and explain how the florist can handle taking this loan.
do I multiply
.18*25,000
i'm not sure how to do this one either
Yes, that's a good start.
0.18*25,000 = 4,500 interest for one year
The loan is for only 1/2 year, so divide:
4,500 / 2 = 2,250
(2,250 + 25,000) / 6 = $_________ a month
thx so much!
To calculate the monthly payment for the loan, you'll need to consider the interest rate, loan amount, and loan term (in this case, 6 months).
Step 1: Convert the annual interest rate to a monthly rate.
Divide the annual interest rate by 12 to get the monthly rate.
18% / 12 = 0.18 / 12 = 0.015
Step 2: Calculate the interest for each month.
To calculate the interest for each month, multiply the loan amount by the monthly interest rate.
0.015 * $25,000 = $375
Step 3: Calculate the total loan amount, including interest.
Add the loan amount to the interest.
$25,000 + $375 = $25,375
Step 4: Divide the total loan amount by the number of months to get the monthly payment.
$25,375 / 6 = $4,229.17
So, the monthly payment for the loan would be $4,229.17.
To handle the loan, the florist should ensure that she has sufficient cash flow to make the monthly loan payments. She can review her income and expenses to determine if she can afford the monthly payment. If necessary, she may need to adjust her budget or seek alternative sources of income to ensure timely repayments.
To calculate the monthly payment for the loan, you need to use the formula for calculating loan payments. The formula is:
Monthly Payment = (Loan Amount * Monthly Interest Rate) / (1 - (1 + Monthly Interest Rate) ^ -Number of Months)
In this case, the loan amount is $25,000 and the interest rate is 18% per annum. However, we need to convert the annual interest rate to a monthly interest rate. To do this, we divide the annual rate by 12 (number of months in a year), and then divide it by 100 to express it as a decimal.
So, the monthly interest rate would be (18/12)/100 = 0.015.
Now, substitute the values into the formula:
Monthly Payment = (25,000 * 0.015) / (1 - (1 + 0.015) ^ -6)
To simplify it further, we can use a calculator or a spreadsheet software to evaluate the expression:
Monthly Payment ≈ $4,888.37
Therefore, the monthly payment for the loan would be approximately $4,888.37.
Now, let's discuss how the florist can handle taking this loan. Based on the loan amount and interest rate, the florist needs to ensure that she can make monthly payments of $4,888.37 for six months. Here are a few steps the florist can take to manage this loan:
1. Assess cash flow: The florist should review her current and projected cash flow to ensure that she can comfortably cover the monthly loan payments. This involves analyzing her revenue, expenses, and other financial obligations during the loan term.
2. Budgeting: The florist should create a budget that takes into account the monthly loan payments. By carefully managing her expenses and cutting unnecessary costs, she can free up enough funds to make the monthly payments.
3. Increase sales or reduce expenses: To cover the loan payments, the florist may need to boost her sales or find ways to reduce expenses. This could involve implementing marketing strategies to attract more customers, offering promotions or discounts, identifying cost-saving measures, or negotiating better deals with suppliers.
4. Communicate with the bank: If the florist faces any difficulty in making the monthly payments, it is important to communicate with the bank. They may be able to provide some flexibility, offer alternative repayment arrangements, or provide guidance on refinancing options.
Remember, it is crucial for the florist to carefully evaluate her financial situation and consider the potential risks and benefits before taking on a loan with a significant interest rate.