7 (of 8) Word Problem 10-11 [LU 10-1 (3)] For the best terms on a loan or credit

Question

7 (of 8) Word Problem 10-11 [LU 10-1 (3)] For the best terms on a loan or credit card, you need a credit score above 700. To achieve this, start establishing credit now. Pay all of your bills on time. In addition, use only one-third of your available credit limit and pay off your revolving balance(s) each month. R.J.Johnson has excellent credit She wants to purchase a piece of equipment for her business and was offered 7% for 72 months for the $52,000 unit. What is her monthly payment by add-on method? (Round your answer to the nearest cent.) Monthly payment References eBook & Resources Worksheet Dificulty Intermediate Word Problem 10-11 (LU 10-1 Leaming Objective 10

Explanation / Answer

The annual rate = 7%, number of months = 72 and price of unit = 52,000

Annua lrate = 7%

Monthly rate (RATE) = 0.07/12

Number of year = 72/12 = 6 years

Loan anount = 52000

In the add on method, we calculate the interest as = 0.07*52000*6 = 21,840

The monthly principal = 52,000/72 = 722.22

The monthly interest payment = 21,840/72 = 303.33

Total monthly payment = 722.22+303.33 = $1,025.55

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