Question

Determine the monthly payment using the added interest method
Loan Amount: $ 2,700
Loan term: 2 years
Interest rate: 7.5%

monthly payment: ______?

Answer 1

As per Add-on interest method,

Periodic payment = (Principal + Total interest)/Number of periods

                                = ($ 2,700 + $ 2,700 x 0.075 x 2)/12 x 2

                                = ($ 2,700 + $ 405)/24

                                = $ 3,105/24

                                = $ 129.375 or $ 129.38

Monthly payment will be $ 129.38