Question

If you buy a computer directly from the manufacturer for $3500 and

agree to repay it in 60 equal installments at 1.75% interest per month
on the unpaid balance, how much are your monthly payments? How
much total interest will be paid?

Answer 1

Answer: To calculate the monthly payment, we need to use the formula for the equal monthly installment for a loan with constant payments and interest:

P = (r * PV) / (1 - (1 + r)^-n)

where:

P = monthly payment

r = monthly interest rate

PV = present value (the initial loan amount)

n = total number of payments

In this case, PV = $3500, n = 60, and r = 1.75% per month.

First, we can calculate the monthly interest rate by dividing the annual rate by 12:

r = 1.75% / 100% / 12 = 0.0175/12

Plugging in the values, we get:

P = (0.0175/12 * $3500) / (1 - (1 + 0.0175/12)^-60)

P = $69.92 (rounded to two decimal places)

So the monthly payment is $69.92.

To calculate the total interest paid, we can subtract the initial loan amount from the total of all payments:

Total interest = (P * n) - PV

Total interest = ($69.92 * 60) - $3500

Total interest = $195.20

So the total interest paid is $195.20.

Explanation:

Answer 2

Answer: The total interest paid is $1186.

Step-by-step explanation: The first step is to calculate the monthly interest rate:

1.75% per month can be written as 0.0175 in decimal form.

Next, we can use the formula for the monthly payment of a loan:

P = r(PV) / [1 - (1+r)^(-n)]

Where:

P = monthly payment

r = monthly interest rate

PV = present value of the loan

n = total number of payments

Plugging in the given values, we get:

P = 0.0175(3500) / [1 - (1+0.0175)^(-60)]

= 78.10

Therefore, your monthly payments are $78.10.

To calculate the total interest paid, we can multiply the monthly payment by the number of payments and subtract the original loan amount:

Total interest = (60 x 78.10) - 3500

= 4686 - 3500

= $1186

Therefore, the total interest paid is $1186.