Josh Hamilton is thinking about borrowing $15,000 from his bank. The bank could use add-on rates...

Josh Hamilton is thinking about borrowing $15,000 from his bank. The bank could use add-on rates of 4.5% for 3 years, 5% for 4 years, and 6% for 5 years.

calculate the finance charge and monthly payment for these 3 options.

Expert Solution

3 years loan
Financing amount =    15000
Interest rate =   4.50%
No of months = (3 *12)=   36
Finance charges (Add on interest) = Financing amount*Interest rate*No of Months/12
15000*4.5%*36/12
2025

Equal monthly installments =(principal + finance charges)/no of months
(15000+2025)/36
472.9166667
So equal monthly is   $472.92

4 years loan
Financing amount =    15000
Interest rate =   5.00%
No of months = (4 *12)=   48
Finance charges (Add on interest) = Financing amount*Interest rate*No of Months/12
15000*5%*48/12
3000

Equal monthly installments =(principal + finance charges)/no of months
(15000+3000)/48
375
So equal monthly is   $375.00

5 years loan
Financing amount =    15000
Interest rate =   6.00%
No of months = (5 *12)=   60
Finance charges (Add on interest) = Financing amount*Interest rate*No of Months/12
15000*6%*60/12
4500

Equal monthly installments =(principal + finance charges)/no of months
(15000+4500)/60
325
So equal monthly is   $325.00

jeff jeffy answered 1 month ago

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