Steve wanted to open a day care service facility for dogs. He estimated the costs involved in providing the services desired by
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Interest capitalization is defined as the unpaid interest when added to the principal amount of the loan. It increases the overall cost of the loan.
Bianca will have to pay $13.43 monthly to avoid interest capitalization.
Given that:
Principal value of loan = $2600
Maturity Time = 10 years = 120 months
Interest rate = 6.2% = 0.062
Now, to find the amount of payment by using the formula:
Total payment that is to be paid in 1 year:
Thus, the payment that Bianca has to pay is $13.43.
To know more about interest capitalization, refer to the following link: