Edward A. answered • 03/23/23
Finance Professional with Over 30 Years of Global Corporate Experience
To calculate the savings for a 3% APR with $100 monthly payments after six months, we need to know the starting balance and whether the interest is compounded monthly or annually. Assuming that the interest is compounded monthly and the starting balance is $0, we can calculate the savings as follows:
First, we calculate the monthly interest rate by dividing the annual percentage rate (APR) by 12.
Monthly interest rate = 3% / 12 = 0.0025
Next, we calculate the interest earned in the first month by multiplying the starting balance by the monthly interest rate.
Interest earned in first month = $0 x 0.0025 = $0
We add the monthly payment of $100 to the balance and subtract the interest earned in the first month.
Balance after first month = $0 + $100 - $0 = $100
We repeat this process for each subsequent month.
Balance after second month = $100 + $100 - ($100 x 0.0025) = $199.75
Balance after third month = $199.75 + $100 - ($199.75 x 0.0025) = $299.26
Balance after fourth month = $299.26 + $100 - ($299.26 x 0.0025) = $398.78
Balance after fifth month = $398.78 + $100 - ($398.78 x 0.0025) = $498.31
Balance after sixth month = $498.31 + $100 - ($498.31 x 0.0025) = $597.85
Finally, we calculate the total savings by subtracting the total amount paid from the final balance.
Total savings = $597.85 - ($100 x 6) = $237.85
Therefore, the savings for a 3% APR with $100 monthly payments after six months, assuming monthly compounding, and starting with $0, is $237.85.
