Shelly Sanders gets a loan for $2,000 and repays the loan in 12 monthly payments of...

Shelly Sanders gets a loan for $2,000 and repays the loan in 12 monthly payments of $172.50 per month. Under the APR formula, what is the amount of interest included in her first payment?

A) $9.61

B)$ 8.17

C)$ 10.77

D) $ 5.83

E) $ 9.33

Solutions

Expert Solution

Calculation of monthly interest rate

Present Value Of An Annuity
= C*[1-(1+i)^-n]/i]

Where,
C= Cash Flow per period
i = interest rate per period
n=number of period

2000= $172.5[ 1-(1+i)^-12 /i]
i=0.539%

Interest for first month = $2000*0.539%
=$10.77

Correct Answer -C)$ 10.77

jeff jeffy answered 1 year ago

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