Cimarron Homes Inc. purchased a snow plow for $50,000 and financed the full amount for 8 years at an annual simple interest rate of 9%.
a. Find the interest due on the loan.
b. Find the monthly payment.
Round your answer to the nearest cent.

Question

Cimarron Homes Inc. purchased a snow plow for $50,000 and financed the full amount for 8 years at an annual simple interest rate of 9%. 
a. Find the interest due on the loan.
b. Find the monthly payment.
Round your answer to the nearest cent.

Quizplus · Accepted Answer

a. The interest due on the loan can be found using the formula I = P * r * t, where P is the principal amount, r is the annual interest rate, and t is the time in years. In this case, P = $50,000, r = 0.09, and t = 8. Therefore, I = 50000 * 0.09 * 8 = $36,000.
b. The monthly payment can be found using the formula:
M = (P + I) / (n * t)
where M is the monthly payment, P is the principal amount, I is the interest due, n is the number of payments per year, and t is the total number of years. In this case, P = $50,000, I = $36,000, n = 12 (since there are 12 months in a year), and t = 8. Therefore, M = (50000 + 36000) / (12 * 8) = $895.83.
Therefore, the best choice is C as it has the correct answers for both parts.