Question

Assume you obtain a $12,000 loan (without credit life insurance). It is a four-year simple-ineterest installment loan with an annual interest rate of 12.50 percent. First, what would be the monthly payment? Second, how much total interest will you pay over the four years? Third, what is the APR on this loan?

Answer 1

Answer:

Explanation:

Given:

• $12,000 loan => P = 12000

• Annual interest rate of 12.50 percent => r = 12.5%

• Four-year simple-ineterest installment loan => n= 4 years = 12*4 =48 months

So monthly payment = $\frac{The principle}{number of periods}$= $\frac{12000}{48} = 250$

and the total interest will you pay over the four years = 4*12000*12.15% = 583.2

APR—Annual Percentage Rate = Interest rates are usually given as an annual percentage rate (APR)—the total interest that will be paid in the year. If the interest is paid in smaller time increments, the APR will be divided up.

Here is is 12.15%