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NotSoSmart  Sep 21, 2018
 #1
avatar+13044 
+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
avatar
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
 #3
avatar+3460 
+1

Is the answer $3799.20?

NotSoSmart  Sep 26, 2018
 #4
avatar
+1

Yes, that is the correct answer.

Guest Sep 26, 2018

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