A bank lends you $20,000 at an interest rate of 0.5% per month for 24 months....

 

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A bank lends you $20,000 at an interest rate of 0.5% per month for 24 months. You repay the loan in equal payments of $P each month. Give the formulae for the following quantities (i) the loan balance Am+1 after m + 1 months in terms of the loan balance Am after m months and the data. (ii) the monthly payment $P. (iii) What is the maximum interest expense that you will pay in any month? (iv) Do you expect the total interest payment on this loan to be more more than, equal to, or less than, $1,000? (Circle one). (v) Do you expect the outstanding balance on the loan after 12 months to be more than, equal to, or less than, $10,500? (Circle one). (vi) Suppose that you want to borrow $20,000 at this interest rate of 0.5% per month but want to have payments that are no more than $800 per month. What is the formula for the minimum number of payments that you will have to make? A bank lends you $20,000 at an interest rate of 0.5% per month for 24 months. You repay the loan in equal payments of $P each month. Give the formulae for the following quantities (i) the loan balance Am+1 after m + 1 months in terms of the loan balance Am after m months and the data. (ii) the monthly payment $P. (iii) What is the maximum interest expense that you will pay in any month? (iv) Do you expect the total interest payment on this loan to be more more than, equal to, or less than, $1,000? (Circle one). (v) Do you expect the outstanding balance on the loan after 12 months to be more than, equal to, or less than, $10,500? (Circle one). (vi) Suppose that you want to borrow $20,000 at this interest rate of 0.5% per month but want to have payments that are no more than $800 per month. What is the formula for the minimum number of payments that you will have to make?

Answer rating: 100% (QA)

i The loan balance Am1 after m1 months can be calculated using the following formula Am1 Am SP 05100 ... View the full answer