Question

Adam is buying a hot air balloon for 19,000 with a down payment of 5,000. The bank approved a simple interest flat rate loan for 5 years at 10%APR. how much are the monthly loan payments?
A. $300.00
B. $350.00
C. $425.00
D.$475.00

Answer 1

The monthly loan payments are $350 ⇒ B

Step-by-step explanation:

Simple Interest formula (Principal + Interest)  is A = P(1 + rt)  where:

• A is total accrued amount (principal + interest)
• P is principal Amount
• r is rate of interest per year in decimal
• t is time period involved in months or years

Adam is buying a hot air balloon for 19,000 with a down payment of 5,000. The bank approved a simple interest flat rate loan for 5 years at 10%APR.

We need to find how much the monthly loan payments are

∵ Adam is buying a hot air balloon for $19,000 with a down payment

  of $5,000

- Subtract the down payment from the cost of the balloon

∴ P = 19000 - 5000 = 14000

∵ The bank approved a simple interest flat rate loan for 5 years at

   10% APR

∴ t = 5

∴ r = 10% = 10 ÷ 100 = 0.1

- Substitute all of theses values in the formula above

∵ A = 14000[1 + 0.1(5)]

∴ A = 21000

∴ The loan payment is $21000

- The loan will pay in 5 years

∵ The number of monthly payment = 5 ×12 = 60

- Divide the amount of loan payment by 60

∴ The monthly loan payments = 21000 ÷ 60 = 350

The monthly loan payments are $350

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