Western Bank offers you a $21,000, 6-year term loan at 8 percent annual interest. What is the amount of your annual loan payment?

Question

Quizplus · Accepted Answer

To calculate the loan payment, we can use the formula:

Loan Payment = (Loan Amount x Annual Interest Rate) / (1 - (1 + Annual Interest Rate) ^ (-Number of Years))

Plugging in the given values, we get:

Loan Payment = (21,000 x 0.08) / (1 - (1 + 0.08) ^ (-6))
Loan Payment = 4,542.62

Therefore, the answer is B.

Western Bank Offers You a $21,000, 6-Year Term Loan at 8