Simple interest calculation follows the formula:
I=Interest
P=Principal
R= Interest Rate
T= Time.
The challenge: John decides to buy a car. The dealer gives him a price and tells him he can pay on time as long as he makes 36 installments and agrees to pay six per cent interest. (6%).
The facts are:
Agreed price 18,000 for the car, taxes included.
3 years or 36 equal payments to pay out the debt.
Interest rate of 6%.
The first payment will occur 30 days after receiving the loan
A simple timeline will give you an idea of the question we need to address.
The facts are:
Agreed price 18,000 for the car, taxes included.
3 years or 36 equal payments to pay out the debt.
Interest rate of 6%.
The first payment will occur 30 days after receiving the loan
A simple timeline will give you an idea of the question we need to address.
To simplify the problem, we know the following:
1. The monthly payment will include at least 1/36th of the principal so we can pay off the original debt.
2. The monthly payment will also include an interest component that is equal to 1/36 of the total interest.
3. Total interest is calculated by looking at a series of varying amounts at a fixed interest rate.
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