Item 2 a music company offers a loan to buy a drum set for $1500. the simple interest is 11.8% and the loan will be paid in equal monthly payments for 2 years. what is the monthly payment?

Question

Alisa Morgan

Mathematics

12 April, 12:45

Item 2 a music company offers a loan to buy a drum set for $1500. the simple interest is 11.8% and the loan will be paid in equal monthly payments for 2 years. what is the monthly payment?

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Answers (1)

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Justine Gill · Answer 1

For the future worth of money that is growing with a simple interest, we have the equation,

F = P + Prn

where F is the future worth, P is the principal amount, r is the decimal equivalent of the rate, and n is the number of years. Substituting the known values,

F = 1500 + 1500 (0.118) (2) = 1854

Since, the payment is to be made monthly and there are 12 months per year, the monthly payment should be,

monthly payment = 1854 / 24 = $77.25.