The add-on method is a widely used technique for computing interest on installment loans. With the add-on method, interest is calculated by applying the stated interest rate to the balance of the loan. Finance charges using the add-on method are computed using the simple interest formula: FsFs = P x r x t In the equation, FsFs is the finance charge for the loan. What are the other values? P is the amount of the loan. r is the stated rate of interest. t is the term of the loan in . You’re borrowing $4,000 for two years with a stated annual interest rate of 4%. Complete the following table. (Note: Round your answers to the nearest dollar.) Principal $4,000 Finance charge $ Total payback $ You will make monthly payments throughout the life of the loan, in this case, months. What will your monthly payments be?
The add-on method is a widely used technique for computing interest on installment loans. With the add-on method, interest is calculated by applying the stated interest rate to the balance of the loan. Finance charges using the add-on method are computed using the simple interest formula: FsFs = P x r x t In the equation, FsFs is the finance charge for the loan. What are the other values? P is the amount of the loan. r is the stated rate of interest. t is the term of the loan in . You’re borrowing $4,000 for two years with a stated annual interest rate of 4%. Complete the following table. (Note: Round your answers to the nearest dollar.) Principal $4,000 Finance charge $ Total payback $ You will make monthly payments throughout the life of the loan, in this case, months. What will your monthly payments be?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
Related questions
Question
Calculating an installment loan payment using the add-on method
Calculating the loan payment on an add-on interest installment loan
Installment loans allow borrowers to repay the loan with periodic payments over time. They are more common than single–payment loans because it is easier for most people to pay a fixed amount periodically (usually monthly) than budget for paying one big amount in the future. Interest on installment loans may be computed using the simple interest method or the add-on method.
The add-on method is a widely used technique for computing interest on installment loans. With the add-on method, interest is calculated by applying the stated interest rate to the balance of the loan. Finance charges using the add-on method are computed using the simple interest formula:
FsFs = P x r x t
In the equation, FsFs is the finance charge for the loan. What are the other values?
P is the amount of the loan.
r is the stated rate of interest.
t is the term of the loan in .
You’re borrowing $4,000 for two years with a stated annual interest rate of 4%. Complete the following table. (Note: Round your answers to the nearest dollar.)
| Principal | $4,000 |
| Finance charge | $
|
| Total payback | $
|
You will make monthly payments throughout the life of the loan, in this case,
months.
What will your monthly payments be? Round your answer to the nearest cent. $
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 6 steps with 3 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Recommended textbooks for you
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education