SOLUTION: 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 ma

Algebra ->  Finance -> SOLUTION: 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 ma      Log On


   

Question 1170446: 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 30 months at 9% APR. How much of the first month's payment is interest? (Round your answer to the nearest cent.)
Answer by CPhill(1987) About Me  (Show Source):
You can put this solution on YOUR website!
Let's calculate the interest portion of the first month's payment.
**1. Calculate the Monthly Interest Rate:**
* APR (Annual Percentage Rate): 9% or 0.09
* Monthly Interest Rate: APR / 12 = 0.09 / 12 = 0.0075
**2. Calculate the Interest for the First Month:**
* Loan Amount: $2,000
* Monthly Interest Rate: 0.0075
Interest for First Month = Loan Amount * Monthly Interest Rate
Interest for First Month = $2,000 * 0.0075
Interest for First Month = $15
**Therefore, $15 of the first month's payment is interest.**