A bank offers a 24-month installment loan with an APR of 10.5%. Martha wishes to use the loan to finance a sofa for $1,000. After using Table 13-1 from your text to find the finance charge, calculate the monthly payment.

Question

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The monthly payment can be calculated by first determining the total finance charge using the APR and then dividing the total amount to be repaid (principal + finance charge) by the number of months. The correct monthly payment is $46.38, indicating that the calculation accounts for both the principal and the interest over the 24-month period.

A Bank Offers a 24-Month Installment Loan with an APR