Question

Amanda just took out a loan for $950 at a 7.2% APR, compounded monthly, to

Answer 1

Answer:

C. 16 months faster

Step-by-step explanation:

You can solve this using a Financial calculator( TI BA II plus in this case)

First, find number of months if recurring monthly payment is $38.50;

Amount borrowed ; PV = -950

Monthly rate ; I/Y  = 7.2%/12 = 0.6%

Monthly payment; PMT = 38.50

Future value ; FV = 0

Total duration;  press CPT, N = 26.785  OR 27 months

Next, find number of months if recurring monthly payment is $93;

Amount borrowed ; PV = -950

Monthly rate ; I/Y  = 7.2%/12 = 0.6%

Monthly payment; PMT = 93

Future value ; FV = 0

Total duration;  press CPT, N = 10.573 OR 11 months

Difference = 27 -11 = 16

Therefore, she would be able to pay off the loan 16 months faster.