Question

If you buy a computer directly from the manufacturer for $ 2 comma 237 and agree to repay it in 60 equal installments at 1.88 % interest per month on the unpaid​ balance, how much are your monthly​ payments? How much total interest will be​ paid?

Answer 1

Answer:

The monthly​ payments to be made is $62.50. The total interest that will be paid is $1,513.

Step-by-step explanation:

The formula to compute the monthly payment is:

$A=P\times [\frac{i(1+i)^{n}}{(1+i)^{n}-1}]$

Here,

A = periodic payment

P = principal amount borrowed

i = periodic interest rate

n = number of periods

The information provided is:

P = $2,237

i = 1.88% = 0.0188

n  = 60

Compute the value of A as follows:

$A=P\times [\frac{i(1+i)^{n}}{(1+i)^{n}-1}]$

   $=2237\times [\frac{0.0188(1+0.0188)^{60}}{(1+0.0188)^{60}-1}]$

   $=2237\times 0.02794\\=62.50178\\\approx \ 62.50$

Thus, the monthly​ payments to be made is $62.50.

The formula to compute the total interest that will be paid is:

$Interest=(A\times n)-P$

Compute the total interest that will be paid as follows:

$Interest=(A\times n)-P$

             $=(62.50\times 60)-2237\\=3750-2237\\=1513$

Thus, the total interest that will be paid is $1,513.