SOLUTION: im not sure what ategory this falls under but please help with step by step!! caroline gets a small business loan for $75,000 to start her hair salon. she will repay the loan with

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Question 1002224: im not sure what ategory this falls under but please help with step by step!!
caroline gets a small business loan for $75,000 to start her hair salon. she will repay the loan with equal monthly payments over 5 years at 8.4% per year compounded monthly.
a) what is carolines monthly loan payment?
b) what is the total amount caroline repays ?
c) how much of the amount repaid is interest?
PLEASE ANSWER I WILL RECOMEND TO EVERYONE!!
Answer by Theo(13342) (Show Source):
You can put this solution on YOUR website!
i moved it to algebra in finance.
that appears to be a better catgegory for it.

the amount of the loan is 75,000.
the annual percentage rate (apr) is 8.4%
the number of years of the loan is 5.

the formula for payment of a present value is:

pmt is the payment per time period.
pv is the present value which is also called the loan amount.
r is the interest rate per time period.
n is the number of time periods.

in your problem.....

pmt is what you want to find.
pv is equal to 75,000 dollars.
r is equal to 8.4 / 100 / 12 = .007
n is equal to 5 * 12 = 60

the time period is in months so you have to translate years into months by multiplying the number of years by 12 to get months.
5 * 12 = 60 as shown above.

you are given the interest rate percent per year.
you have to divide that by 100 to get the interest rate per year.
you then divide the interest rate per year by 12 to get the interest rate per month.
8.4 / 100 / 12 = .007 as shown above.

the rest is just replacing the variables in the formula with their respective values.

the following worksheet shows you the calculations required and the result.

you can also use an online calculator to get the same result.

one such calculator can be found here.

http://arachnoid.com/lutusp/finance.html

with this online calculator, you enter the percent per time period, not the rate.

you would enter .7 rather than .007

you would make all necessary entries and then you would click on pmt and it will tell you what the payment per time period is.

you also want to make sure that it is set to end of time period payments because that is the default.

you will get what you see below.

answers to your questions are shown below:

a) what is carolines monthly loan payment?

her monthly payment is 1535.13

b) what is the total amount caroline repays ?

the total amount that she repays is the monthly payment * 60 = 1535.13 * 60 = 92,107.8

c) how much of the amount repaid is interest?

the interest she paid is equal to the total amount she paid minus what she owed.

that is equal to 92,107.8 - 75,000 = 17,107.8