Question 1170454: Use the Estimation Rule for Short-Term Loans to estimate the monthly payment on a loan of $4500 borrowed over a two-year period. (Round your answer to the nearest cent.)
Answer by CPhill(1987)   (Show Source):
You can put this solution on YOUR website! You've asked for an estimation using the "Estimation Rule for Short-Term Loans," but you haven't provided the Annual Percentage Rate (APR). Without the APR, we can't calculate the total interest.
However, I can provide you with the steps and the formula so you can plug in the APR yourself.
**Estimation Rule for Short-Term Loans:**
Monthly Payment ≈ (Total Loan + Total Interest) / Number of Months
**1. Calculate the Total Interest:**
* **Loan Amount (P):** $4,500
* **Annual Percentage Rate (APR) (r):** You need to provide this. Let's represent it as "r" for now.
* **Loan Term (t):** 2 years
Total Interest = P * r * t
Total Interest = $4,500 * r * 2
Total Interest = $9,000 * r
**2. Calculate the Total Loan Amount:**
Total Loan Amount = Loan Amount + Total Interest
Total Loan Amount = $4,500 + ($9,000 * r)
**3. Calculate the Number of Months:**
Number of Months = Loan Term (years) * 12
Number of Months = 2 * 12
Number of Months = 24
**4. Estimate the Monthly Payment:**
Monthly Payment ≈ Total Loan Amount / Number of Months
Monthly Payment ≈ ($4,500 + ($9,000 * r)) / 24
**Example:**
If the APR were 6% (0.06), then:
Total Interest = $4,500 * 0.06 * 2 = $540
Total Loan Amount = $4,500 + $540 = $5,040
Monthly Payment ≈ $5,040 / 24 = $210
**Please provide the APR so I can give you the accurate estimated monthly payment.**
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