compute the monthly add on interest loan of $1290 with an annual interest rate of 7 percent and a term of two years

Question

anonymous · Answer

I you are talking about compound interest obviously as the interest is aded on every month to give a new principal then the interest every month will change.For example 

Principal yr 1: $1290
Interest yr 1(7%p/m.): $90.60
Principal yr 2: $1380.30 [because interest is added on]
Interest yr 2(7% p/m.): $96.60

However, it may be possible to find compound interest over 24 months (2 years) an then get an average per month as follows:

Pn = $1290(1 + 7/100)^23  
Pn = $1290(1.07)^23
Pn = $1290(4.74)
Pn = $6115.28    

Compound interest is therefore: $6115.28 - $1290 = $4825.28 
divide this by 24 months (2 years) to get an average monthly interest:
$4825.28/24 = $201.25