College

You borrow $1200 from your bank to help pay for some emergency home repairs. This loan is paid back by making quarterly payments of $1100 for a total of 3 years.

What is the interest paid on this loan?

Answer :

Final answer:

To determine the interest paid on a loan where $1200 is borrowed and quarterly payments of $1100 are made for 3 years, multiply the number of payments (12) by the payment amount ($1100) to get the total amount paid ($13200) and subtract the initial loan amount ($1200) to find the interest paid ($12000).

Explanation:

The question requires a calculation to determine the interest paid on a loan. Considering you borrow $1200 and make quarterly payments of $1100 for 3 years, the total amount you pay back is the product of the number of payments and the amount per payment. To find the total interest paid, subtract the initial loan amount from the total amount paid over the life of the loan.

Here's how you compute it step by step:

  1. Calculate the total number of quarterly payments: 3 years × 4 quarters/year = 12 payments.
  2. Calculate the total amount paid over the life of the loan: 12 payments × $1100/payment = $13200.
  3. Determine the total interest paid: Total amount paid ($13200) - Initial loan amount ($1200) = $12000.

The total interest paid on the loan is $12000, assuming there are no other fees or penalties.

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