Question

Kendra took out a loan for $750 at an 8.4% APR, compounded monthly, to buy

Answer 1

Answer:

N= ;1% = 8.4; PV=-750; PMT=46.5; FV=0; P/Y=12; C/Y=12; PMT:END

Explanation:

A p e x

Answer 2

Answer:

The number of payments Kendra will have to make = 17.33 to pay off the loan completely within 18 months.

Explanation:

Paying $ 46.50 monthly, a financial calculator says it will take 18 months to pay off the loan which can also be calculated manually as follows:

$\ 750 \times \frac{8.4}{100}$

= $63 + $750

$=\frac{\ 813}{46.50}(\ 46.50 \text { per month })$

= 18 months.

Amortization formula for “ n” the no of payments she will have to make is:

$\mathbf{n}=\frac{-\log \left[1-\left(\mathbf{P} \times \frac{i}{A}\right)\right]}{\log (1+\mathbf{i})}$

here, P = principal value of loan $750

         i = monthly interest rate 0.007

         A = monthly payment 46.50

Substituting values in formula

$n=\frac{-\log \left[1-\left(750 \times \frac{0.007}{46.50}\right)\right]}{\log (1+0.007)}$

$n=\frac{-\log [1-0.1129]}{\log (1.007)}$

$n=\frac{-\log [0.8871]}{3.029 \times 10^{-3}}$

$n=\frac{0.052}{3.029 \times 10^{-3}}$

$n=1.716$

The number of payments Kendra will have to make is 17.33 to pay off the loan completely within 18 months.