Question

Ally is buying a speed boat for $10,000 with a down payment of $2,500. The bank approved a simple interest flat rate loan for 5 years at 7% APR. How much are the monthly loan payments? (round to the nearest cent) A) $157.50 B) $168.75 C) $180.00 D) $191.25

Answer 1

Answer:

B

Step-by-step explanation:

Answer 2

The monthly loan payment should be $168.75.

Calculation of the monthly loan payment;

Since Ally is buying a speed boat for $10,000 with a down payment of $2,500. The bank approved a simple interest flat rate loan for 5 years at 7% APR.

The net principal should be

= $10,000 - $2,500

= $7,500

Now simple interest should be

= $7,500(5)(7%)

= $2,625

Now the total amount should be

= $7,500 + $2,625

= $10,125

Now the monthly payment is

$= 10125\div (12\times 5)\\\\= 10125 \div 60$

= $168.75

Therefore, The monthly loan payment should be $168.75.

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