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13 March, 22:54

Paul received a 12,000 loan from the bank. The bank charges his 6.99% yearly interest rate. 4 years, how much money does Paul owe in interest

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  1. 13 March, 23:23
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    Principal amount = 12,000

    Annual interest rate (r) = 6.99% = 0.0699

    Time (years) = 4 years

    Number of installments (t) = 12*4 = 48 months

    Monthly payment, A = P/D

    Where,

    D = { (1+r/12) ^t-1}/{r/12 * (1+r/12) ^t} = { (1+0.0699/12) ^48-1}/{0.0699/12 (1+0.0699/12) ^48} = 42.47

    Therefore, A = 12000/42.47 = 282.59

    Total payments after 4 years = 282.59*4*12 = 13,564.17

    Interest owed = 13,564.17 - 12,000 = 1,564.17
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