   Chapter 13.II, Problem 47RE ### Contemporary Mathematics for Busin...

8th Edition
Robert Brechner + 1 other
ISBN: 9781305585447

#### Solutions

Chapter
Section ### Contemporary Mathematics for Busin...

8th Edition
Robert Brechner + 1 other
ISBN: 9781305585447
Textbook Problem

# Valerie Ross financed a cruise to the Bahamas with a 5% add-on interest installment loan from her hank. The total price of the trip was $1,500. The bank required equal monthly payments for 2 years. What are Valerie's monthly payments? To determine To calculate: The monthly payments if Valerie Ross financed a cruise to the Bahamas with a 5% add-on interest installment loan. The total price of the trip was$1,500 and the bank required equal monthly payments for 2 years.

Explanation

Given Information:

Valerie Ross financed a cruise to the Bahamas with a 5% add-on interest installment loan. The total price of the trip was $1,500 and the bank required equal monthly payments for 2 years. Formula used: Follow the steps to compute the monthly payment of installment through add-on interest method. Step 1: Add-on interest finance charge is computed using I=PRT where P is principal or amount financed, R is rate and T is time. Step 2: Total amount of installments payment is computed by adding the finance charge to the amount financed, Total amount of installment payments=Amount financed+Finance charge Step 3: Regular monthly payments is computed by dividing the total amount of installment payments by the number of months of loan, Regular monthly payments=Total amount of installment paymentsNumber of months of the loan Calculation: Consider that amount of purchase price is$1,500, rate is 5%, time is 2 years and number of months of loan is 24.

Compute the finance charge using I=PRT, where P is $1,500, time is 2 years and R is 6%. Finance charge=Principal×Rate×Time=$1,500×0

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