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Case Study #2 Answers

A. To solve for simple interest monthly payments, set your calculator to monthly payments, end mode:

PV = -1,000 , I = 12%, P/Y = 12, N = 24, PMT=?

PMT = $47.074

B. Total interest paid = 47.074 x 24 – 1,000 = ?

$129.76

C. To calculate the APR, it is [(interest + fees) / 2] / average amount borrowed (which changes each year as you pay it down). (See the following slide to see how to get the average amount borrowed of $540.68).

($129.76 / 2 years) / $540.68 = 12%

APR from an Excel spreadsheet

 



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