Question

John bought a new computer for $1,650. He paid a $160 down payment and financed the rest for 1 year at an interest rate of 7%. Find the total interest paid on the given amortized loan assuming that John makes monthly payments. Do not round until the final answer. Then, round to the nearest cent

Answer 1

Loan amount = $1650 - $160 = $1490

First calculate the monthly payment using the formula:
M = L[c(1 + c)^n] / [(1 + c)^n - 1]

M = Fixed Monthly Payment
L = Total Loan Amount = $1490
c = interest rate in decimal PER MONTH where the interest rate is assumed to be compounded monthly = 0.07/12
n = total number of monthly payments = 12 (financed for 1 year)

Plug in, calculate monthly payment.
To find total payment: multiply monthly payment by 12.
Subtract the loan amount $1490 to find the interest paid.