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.

Answer 1

Answer:

First bank = $6792

City bank = $6803

Star bank = $6817  

Step-by-step explanation:

The lists of banks and their annual interests rates are attached.

For first bank, since the interest is 7.5%, The total interest = 7.5% of $20000 = 0.075 × $20000 = $1500

For city bank, since the interest is 8.2%, The total interest = 8.2% of $20000 = 0.082 × $20000 = $1640

For Star bank, since the interest is 9%, The total interest = 9% of $20000 = 0.09 × $20000 = $1800  

The loan plus interest for the banks annually are:

First bank = $20000 + $1500 = $21500

City bank = $20000 + $1640 = $21640

Star bank = $20000 + $1900 = $21900

The monthly payments for the banks are:

First bank = $21500 / 12 months = $1792

City bank = $21640 / 12 months = $1803

Star bank = $21800 / 12 months = $1817

Since The cost to run the gym each month is $5,000. Ed's total monthly expenses for each loan option = monthly payments + cost for each month. It is calculated as:

First bank = $5000 + $1792 = $6792

City bank = $5000 + $1803 = $6803

Star bank = $5000 + $1817 = $6817