The cost of credit is the amount that a person pays over and above the amount borrowed.

Veronica borrowed $4,020.00 from City Credit Union. If she borrowed under Loan B, but paid the loan out in 18 months (without any penalties), what was her cost of credit compared to paying the loan out in 36 months?

P is the principal, r is the interest rate,
m is the number of monthly payments,
M is the monthly payment

Question

The cost of credit is the amount that a person pays over and above the amount borrowed.

Veronica borrowed $4,020.00 from City Credit Union. If she borrowed under Loan B, but paid the loan out in 18 months (without any penalties), what was her cost of credit compared to paying the loan out in 36 months?



P is the principal, r is the interest rate, 
m is the number of monthly payments, 
M is the monthly payment

anonymous · Answer

attachment

anonymous · Answer

@jim_thompson5910 can you help me with this one too?

jim_thompson5910 · Answer

what's the monthly payment in this case?

anonymous · Answer

i dont know how to put it into the formula sorry

jim_thompson5910 · Answer

the formula is 

$$\Large M = \frac{P(r/12)}{1-(1+r/12)^{-m}}$$

jim_thompson5910 · Answer

what are P, r, and m in this case?

jim_thompson5910 · Answer

r = interest rate as a decimal

jim_thompson5910 · Answer

P = amount borrowed/loaned out

anonymous · Answer

i was way off...

jim_thompson5910 · Answer

principal = amount borrowed/loaned out

anonymous · Answer

okay so then it would be r =102 p=4020.00

jim_thompson5910 · Answer

r = 0.102

because

10.2% = 10.2/100 = 0.102

jim_thompson5910 · Answer

so 

P = 4020
r = 0.102
m = 36

plug those numbers into the formula

anonymous · Answer

i dont know why that typed in again sorry

anonymous · Answer

okay hold on

jim_thompson5910 · Answer

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