Question

Ed wants to borrow $20,000 from a bank to open a small gym. Three banks charge different interest rates. To help decide the best loan option, Ed wants to know the percent profit he will make each month.
Part A
The cost to run the gym each month is $5,000. Find Ed’s total monthly expenses for each loan option.

Bank
Repayment Period
Average Monthly Sales
Monthly Loan Payment
Total Monthly Expenses
First
1 year
$7,500
$1,792
?
City
1 year
$7,500
$1,803
?
Star
1 year
$7,500
$1,817
?

Answer 1

(B)Calculate the estimated percent profit. Explain how you  found the estimated percent profit.

Answer:

See Explanation

Step-by-step explanation:

PART A

Ed's Total Monthly Expense for each Loan is given below:

$\left|\begin{array}{c|c|c|c}Bank&First&City&Star\\-------&------&------&-----\\ Repayment Period&1 \:Year&1\: Year&1 \:Year\\ Average Monthly Sales& \ 7,500& \ 7,500& \ 7,500\\ Monthly Loan Payment& \ 1792& \ 1803& \ 1817\\ Total Monthly Expenses&1792+5000&1803+5000&1817+5000\\-----&----&----&----\\& \ 6792&\ 6803&\ 6817\\\end{array}\right|$

PART B

The percentage profit for each option is calculated below.

$\left|\begin{array}{c|c|c|c}Bank&First&City&Star\\-------&------&------&-----\\ Average Monthly Sales& \ 7,500& \ 7,500& \ 7,500\\ Total Monthly Expenses& \ 6792&\ 6803&\ 6817\\Profit& \ 708&\ 697&\ 683\\-----&----&----&----\\Estimated \:Percent \:Profit(\frac{Profit}{7500}X100) & 9.4\%&9.3\%&9.1\%\\-----&----&----&----\\\end{array}\right|$

To calculate the percentage profit:

• Subtract the total monthly expense from the average monthly sales.
• Divide the result by 7500
• Multiply by 100.