Questions: Compute the monthly payments for an add-on interest loan of 990, with an annual interest rate of 7% and a term of 5 years. The monthly payment is . (Round to the nearest cent as needed.)

Compute the monthly payments for an add-on interest loan of 990, with an annual interest rate of 7% and a term of 5 years. The monthly payment is . (Round to the nearest cent as needed.)
Transcript text: Compute the monthly payments for an add-on interest loan of $\$ 990$, with an annual interest rate of $7 \%$ and a term of 5 years. The monthly payment is \$ $\square$ . (Round to the nearest cent as needed.)
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Solution

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Solution Steps

Step 1: Convert the annual interest rate from a percentage to a decimal

To convert the annual interest rate to a decimal, divide by 100: $r_{decimal} = 7 / 100 = 0.07$.

Step 2: Calculate the total interest over the term of the loan

Total interest is calculated as $TotalInterest = P \times r_{decimal} \times t = 990 \times 0.07 \times 5 = 346.500$.

Step 3: Calculate the total amount to be repaid

Total repayment amount is the sum of the principal and the total interest: $TotalRepayment = P + TotalInterest = 990 + 346.500 = 1336.5$.

Step 4: Calculate the total number of monthly payments

Total number of monthly payments is calculated as $TotalPayments = t \times 12 = 5 \times 12 = 60$.

Step 5: Calculate the monthly payment

Monthly payment is calculated by dividing the total repayment amount by the total number of payments: $MonthlyPayment = TotalRepayment / TotalPayments = 1336.5 / 60 = 22.27$.

Final Answer

The monthly payment for the loan is $22.27.

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