#1**+2 **

Well.....the total PAYBACK HAS to at LEAST equal the amount of the loan....plus interest....the only choice is "D" because the other answers are all LESS than the original loan amount !

ElectricPavlov
Sep 21, 2018

#2**0 **

First, you calculate the monthly payment using the formula given in your question as follows:

M = Monthly payment

P = Present value of the loan or $2,500

m=monthly interest rate =10% =0.10 / 12 =0.008333....

a = Number of years

n = Number of compounding periods in 1 year =12

M =2,500 x 0.008333.. x [1 + 0.008333]^(2*12) / [1 + 0.008333]^(2*12) - 1

M =20.8333...x [1.220391] / [1.220391 - 1]

M =20.8333...x 5.53739116

M =$115.36 - The monthly payment on the loan.

**$115.36 x 24 months =$2,768.64 - Total payback for $2,500 loan @ 10%.**

**Note: The discrepancy of about $1 is due to rounding off.**

Guest Sep 21, 2018