Question

Bart needs to borrow $7,000 from a local bank. He compares the
monthly payments for 9.75% loan for three different periods of time. What
is the monthly payment for a 1-year loan?​

Answer 1

Answer:

$614.62

Step-by-step explanation:

The monthly payment is calculated using the formula:

$M=\frac{P(r/12)(1+r/12)^n}{(1+r/12)^n-1}$

where:

• M= monthly payments
• P= the amount borrowed
• r= annual interest rate
• n=total number of monthly payments.

Given the amount borrowed is $7,000, r=9.75% and n=1*12=12 months, the monthly payments can be calculated as:

$M=\frac{P(r/12)(1+r/12)^n}{(1+r/12)^n-1}\\\\=\frac{7000(0.0975/12)(1+0.0975/12)^{12}}{(1+0.0975/12)^{12}-1}\\\\\\=614.62$

Hence, the monthly payments are $614.62