A small business repairs its store. The builders charge them$130,000 which will be paid back...

A small business repairs its store. The builders charge them $130,000 which will be paid back in monthly installments over three years at 6.80% APR. The builders will reduce this rate to 6.30% APR if they pay $2600 up front. By approximately how much will this reduce the monthly loan repayments?

Expert Solution

- Loan amount charged by builder = $130,000

It will be paid back in 36 monthly installments with monthly interest rate of 0.5667%(6.80%/12).

Calculating the monthly loan payment of loan amount $130,000:-

So, monthly loan payment is $4002.15

- Building has offered to reduce the Interest rate too 6.30% if upfront payment of $2600 is paid.

Loan amount after upfront payment = $130,000 - $2600 = $127,400

Calculating the Monthly payment after upfront payment:-

New monthly payment = $3893.10

- So, Reduction in monthly loan payment after reduction in interest rate = $4002.15 - $3893.10

= $109.05

jeff jeffy answered 2 years ago

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