Questions: Angela's bank gave her a 5-year add-on interest loan for 6,660 to pay for new equipment for her antiques restoration business. The annual interest rate is 8.36%. How much interest will she pay? What are her monthly payments? She will pay in interest on the loan. (Round to the nearest cent.) Her monthly payments are (Round to the nearest cent.)

Solution Steps

The formula for add-on interest is: \[ \text{Total Interest} = \text{Principal} \times \text{Annual Interest Rate} \times \text{Time (in years)} \] Substitute the given values: \[ \text{Total Interest} = 6,\!660 \times 0.0836 \times 5 \] \[ \text{Total Interest} = 6,\!660 \times 0.418 = 2,\!783.88 \]

The total amount to be repaid is the sum of the principal and the total interest: \[ \text{Total Amount} = \text{Principal} + \text{Total Interest} \] \[ \text{Total Amount} = 6,\!660 + 2,\!783.88 = 9,\!443.88 \]

The loan term is 5 years, which is equivalent to 60 months. The monthly payment is calculated by dividing the total amount by the number of months: \[ \text{Monthly Payment} = \frac{\text{Total Amount}}{\text{Number of Months}} \] \[ \text{Monthly Payment} = \frac{9,\!443.88}{60} = 157.40 \]

She will pay \$2,783.88 in interest on the loan.
Her monthly payments are \$157.40.

Final Answer