Question

Question 9 (7 points) Adam borrows $6000 for two years at an 8% annual interest rate, what is his monthly payment? A. $250 D. $522 B. $271 C.$290 E. None of these

Answer 1

Answer:

B. $271

Step-by-step explanation:

Given,

Present value of the loan, PV = $ 6000,

Annual rate of interest = 8 % = 0.08,

So, the monthly rate of interest, r = $\frac{0.08}{12}$,

Also, time = 2 years,

So, the total number of months, n = 24,

Hence, the monthly payment would be,

$A=\frac{PV(r)}{1-(1+r)^{-n}}$

$=\frac{6000(\frac{0.08}{12})}{1-(1+\frac{0.08}{12})^{-24}}$

$=\ 271.363748737$

$\approx \ 271$

Option B is correct.