Question

Rounding in the calculation of monthly interest rates is discouraged. Such rounding can lead to answers different from those presented here. For long-term loans, the differences may be pronounced.

Assume that you take out a $2000 loan for 48 months at 3.5% APR. How much total interest will you have paid at the end of the 48 months? (Round your answer to the nearest cent.)
$

Answer 1

Step-by-step explanation:

Are you using a particular calculator for the class? For this class, is the payment expected to be compounded monthly?

There is a function in Microsoft Excel that will calculate the payment for you, but the answer is going to be slightly different for a business math class than a calculus-based statistics class.

The excel formula to calculate a payment is

=PMT(0.04/12,60,25000,0)

.04/12 is the interest APR on a monthly basis

60 is the number of months

25000 is the current amount owed

0 is the future balance after 60 payments

The answer from Excel is $460.41 -- ignore the negative sign for these purposes.

Multiply that number by the 60 months you pay and you get a total paid of $27,624.78

Remove the initial 25K and $2,624.78 is your interest amount.

By the way, I used the simplifying assumptions that the problem meant "interest rate" when it said "APR", and that the rate would compound monthly. In the actual loan industry, the interest rate is only part of the calculation for APR, a

146.08

Step-by-step explanation:

Let's start by figuring out the payment

effective rate: .035/12= .002916667

\begin{gathered}2000=x\frac{1-(1+.002916667)^{-48}}{.002916667}\\x=44.71\end{gathered}

2000=x

.002916667

1−(1+.002916667)

−48

x=44.71

then it's just

44.71*48-2000=146.08

Answer 2

Answer:

146.08

Step-by-step explanation:

Let's start by figuring out the payment

effective rate: .035/12= .002916667

$2000=x\frac{1-(1+.002916667)^{-48}}{.002916667}\\x=44.71$

then it's just

44.71*48-2000=146.08