SOLUTION: Please help me with this question:
Interest on a twelve-month installment loan is to be calculated using the discount nethod. If the purchase to be financed is $1,000 and the disc
Question 117481: Please help me with this question:
Interest on a twelve-month installment loan is to be calculated using the discount nethod. If the purchase to be financed is $1,000 and the discount rate is 6%, then your monthly payment is what? Answer by tutor_paul(519) (Show Source):
You can put this solution on YOUR website! First, calculate the total interest you have to pay:
where:
I = total amount of interest paid
A = loan amount
i = interest rate per time period
N = number of time periods covered by the loan
So in your case:
Note that for the "discount method," the amount of money you receive as a borrower already has the interest deducted from it. So you will actually be receiving, called the loan proceeds and represented by 'L' is:
So even though you got only $940 from the bank, the payments are based on 'A' which is the loan amount of $1000. Since you are repaying this on a 12 month installment loan, the monthly loan payments are:
Good Luck,
tutor_paul@yahoo.com
