You just received a loan offer from Friendly Loans.The company is offering you $5,000 at 9.3 percent interest.The monthlypayment is only $100.If you accept this offer,how long will it take you to pay off the loan?

Question

Quizplus · Accepted Answer

To find out how long it will take to pay off the loan, we need to use the formula:

n = -log(1 - i/PV) / log(1 + i)

where:
n = number of periods (in months, since the monthly payment is given)
i = monthly interest rate (9.3% / 12 = 0.00775)
PV = present value (the loan amount, $5,000)

Substituting the values, we get:

n = -log(1 - 0.00775/100 * 5000) / log(1 + 0.00775)
n = 62.87 or approximately 63 months

Therefore, it will take about 5.29 years (63 months / 12 months per year) to pay off the loan. Hence, the best choice is B) 5.29 years.

You Just Received a Loan Offer from Friendly Loans