Question

Professor is taking out a loan to buy a sweet Wave Runner. The Wave Runner price is $22,000. The loan is a 2 year loan at 5.5% with MONTHLY payments.  What is the payment?  How much interest will you pay over the life of the loan?

Please show in excel format

Answer 1

Rate per month =5.5%/12
Number of Months =2*12 =24
Price =22000
Monthly Payment =Price/((1-(1+r)^-n)/r) =22000/((1-(1+5.5%/12)^-24)/(5.5%/12))=970.1044 or 970.10
Excel Formula =PMT(5.5%/12,24,-22000) =970.10

Total interest =Monthly Payment*Number of months -Price =970.1044*24-22000=1282.51

Using excel formula
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Rate per month =5.5%/12	0.46%
Number of Months =2*12 =24	24
Price	22000
		Excel Formula
Monthly Payment	$970.10	PMT(5.5%/12,24,-22000)
Interest	$1,282.51	(=24*970.10-22000)