Please Help!

Question

A loan of $4,700 at 6.60% is to be repaid by three equal payments due four, six, and eight months after the date on which the money was advanced.



Calculate the amount of each payment. Use the loan date as the focal date. (Do not round intermediate calculations and round your final answer to 2 decimal places.)

Answer 1

It appears that you meant to calculate the interest over the 8 month period, add the interest to the principal, and then divide that total into 3 payments. Furthermore, one can only assume that the interest rate is simple interest.

 

step 1: we must convert the annual interest rate to % per month. So, 6.60% ÷ 12 = 0.55% or 0.0055 per month

 

step 2: The interest is given by the formula I = P R T, where P = Principal, R = annual interest rate, and T = Time

 

step 3: we calculate the interest as follows:

I = $4,700 x 0.0055/month x 8 months = $206.80

 

step 4: we add the interest to the principal = $4,906.80, and divide that number by 3

 

we get $1,635.60