You borrow $20,000 to buy a boat.The loan is to be paid off in monthly installments over one year at 18% interest annually.The first payment is due one month from today.What is the amount of each monthly payment?

Question

Quizplus · Accepted Answer

First, we need to calculate the monthly interest rate:
18% annual interest / 12 months = 1.5% monthly interest rate

Then, we can use the formula for monthly payments on a loan:

Monthly payment = (P*r)/(1 - (1+r)^(-n))
where P is the loan amount, r is the monthly interest rate, and n is the number of monthly payments.

Plugging in our values:
Monthly payment = (20000*0.015)/(1 - (1+0.015)^(-12))
Monthly payment = 1834.03

Rounding down to the nearest cent, the answer is $1,834.

You Borrow $20,000 to Buy a Boat