Using simple interest, it is found that the monthly payments are of $854.875.
<h3>Simple Interest</h3>Simple interest is used when there is a single compounding per time period.
The amount of money after t years in is modeled by:
In which:
- A(0) is the initial amount.
- r is the interest rate, as a decimal.
In this problem, the parameters are A(0) = 49000, r = 0.0665, t = 7, hence the total amount is of:
Payments over a period of 12 x 7 = 84 months, hence the monthly payments are of:
71809.5/84 = $854.875.
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