Question

You have just received an offer in the mail from Friendly Loans. The company is offering to loan you $4,500 with low monthly payments of $80 per month. If the interest rate on the loan is an APR of 14.3 percent compounded monthly, how long will it take for you to pay off the loan

Answer 1

It takes 8 years 4 months to pay off the loan.

Step-by-step explanation:

Use Time Value of Money Techniques to find N (the period it takes to pay off the Principle Amount)

Using a financial calculator, enter the data as follows

PV = $4,500

PMT = - $80 × 12 = - $960

P/YR = 1

R = 14.3 %

FV = $0

Therefore, N = 8.3020

Conclusion ;

It takes 8 years 4 months to pay off the loan.