Answer:
a. $188.49; b. $7916.44; c. 816.44
Step-by-step explanation:
Part a. Monthly payment
The formula for the monthly payment (P) on a loan of A dollars that is paid back in equal monthly payments over n months at an annual interest rate
of i % is
[tex]P = A(\frac{i}{1-(1+i)^{-n}})[/tex]
We must express the interest rate on a monthly basis.
i = 6.2 %/yr = 0.5167 %/mo = 0.005 167
A = $7100
n = 42 mo
[tex]P = 7100(\frac{0.005 167 }{1-(1+0.005 167)^{-42}})[/tex]
[tex]P = \frac{36.68}{1-1.005 167^{-42}}[/tex]
[tex]P = \frac{36.68}{1-0.8053}[/tex]
[tex]P = \frac{36.68}{0.1946}[/tex]
P = $188.49
Faith’s monthly payment is $188.49.
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b. Total payment
Faith makes 42 payments of $188.49.
Total payments = 42 × 188.49
Total payments = $7916.44
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c. Total interest
Total interest = total payments – principal
Total interest = 7916.44 – 7100.00
Total interest = $816.44
