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dedylja [7]
4 years ago
11

You have just received an offer in the mail from Friendly Loans. The company is offering to loan you $5,000 with low monthly pay

ments of $150 per month. If the interest rate on the loan is an APR of 16.1 percent compounded monthly, how long will it take for you to pay off the loan? Multiple Choice a. 47.90 months b. 44.48 months c. 33.33 months d. 41.51 months
Business
1 answer:
Lera25 [3.4K]4 years ago
3 0

Answer:

b. 44.48 months

Explanation:

We need to sovle for n in a common annuity:

C \times \frac{1-(1+r)^{-time} }{rate} = PV\\

C  $150.00

time n

rate 0.013416667 (0.161 / 12 months per year)

PV $5,000.0000

150 \times \frac{1-(1+0.0134167)^{-n} }{0.0134167} = 5000\\

(1+0.0134167)^{-n}= 1-\frac{5000\times0.0134167}{150}

(1+0.0134167)^{-n}= 0.55277778

We solve using logarithmics properties

-n= \frac{log0.552777777777778}{log(1+0.0134166666666667)

-n = -44.47953304

n = 44.48

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Answer:

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