Question

compute the monthly payments for an add on interest loan of $1960, with an annual interest rate of 9% and a term of 4 years..

Answer 1

Solution

For this case we can use the following formula:

$A=P\cdot\frac{r(1+r)^n}{(1+r)^n-1}$

For this case

P= 1960

r= 0,09/12= 0.0075

n= 4*12= 48

Replacing we got:

$A=1960\cdot\frac{0.0075(1+0.0075)^{48}}{(1+0.0075)^{48}-1}=48.77$

then the answer for this case would be:

48.77$

Solution alternative proposed

$\frac{P+I}{n}$

P= 1960 $

I = 0.09*1960*4= 705.6 $

n = 12*4years= 48months

Replacing we got:

$\frac{1960+705.6}{48}=55.53$