Question

You have a $3175 student loan. Suppose you pay the loan off in two and a half years (30 months). Estimate your monthly payment by ignoring interest and rounding down the amount owed. (Round your answer to the nearest dollar.)

Answer 1

$106

Explanation:

The formula given for Monthly payment of a loan =

P × [ r (1 + r)/(1 + r)^n - 1

Where

r = interest rate

n = number of monthly payments

P = Present value of the loan

From the question,

r = interest rate, we were told to ignore hence, r = 0

P = $3,175

n = 30

Hence,

Amount to be paid monthly = P/n

= $3175/30

= $105.83

Approximately to the nearest dollars

= $106