How Much Must John Pay the Bank if He Returns the Loan in Full in 6 Months?

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In summary, John took out a loan for $3000 and the bank set up a payment plan of 60 months with a monthly fee of $73.80 for 59 months and a final month fee of $73.40. The yearly interest rate is 15.99%. After 60 months, John will owe the bank $4,427.59. If he pays the loan in less than 5 years, the amount owed will be less. To calculate the amount owed after 6 months, we need to know if the interest rate is annual effective or monthly. If it is annual effective, the amount owed will be $2,790.17. If it is monthly, the amount owed will be different. There
  • #1
nycfunction
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John took out a loan for 3000 dollars. The bank made a payment plan of 60 months at 73.80 for 59 months and then 73.40 for the final month. The cost of his credit as a yearly rate is 15.99 percent. After 60 months (5 years), John will owe the bank a total of 4,427 dollars and 59 cents. If John pays the loan in less than 5 years, the amount he must pay the bank will NOT be 4,427 dollars and 59 cents.

A. How much must John pay the bank if he returns the loan in full in 6 months?

B. Same as A for 1 year.

C. Is there a formula to work out parts A and B? If so, what is that formula?

Thank you.
 
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  • #2
nycfunction said:
John took out a loan for 3000 dollars. The bank made a payment plan of 60 months at 73.80 for 59 months and then 73.40 for the final month. The cost of his credit as a yearly rate is 15.99 percent. After 60 months (5 years), John will owe the bank a total of 4,427 dollars and 59 cents. If John pays the loan in less than 5 years, the amount he must pay the bank will NOT be 4,427 dollars and 59 cents.
A. How much must John pay the bank if he returns the loan in full in 6 months?
B. Same as A for 1 year.
C. Is there a formula to work out parts A and B? If so, what is that formula?
Sorry, but that problem as stated does not make sense.
Can you ask someone familiar with English to help you post it properly? Thank you.
Important is the rate: is it 15.99 annual effective, or .1599/12 monthly.
 
  • #3
Wilmer said:
Sorry, but that problem as stated does not make sense.
Can you ask someone familiar with English to help you post it properly? Thank you.
Important is the rate: is it 15.99 annual effective, or .1599/12 monthly.

Sorry but the words are not my own. I found this problem online but cannot remember the site.
 
  • #4
Well, whoever "arranged" the problem simply didn't know what he/she was doing...

IF the payment is 73.80 and the rate is 15.99% annual cpd. monthly,
then what is owing after 6 months is THE ACTUAL BALANCE OWING AFTER 6 PAYMENTS:
Code:
  MONTH    PAYMENT    INTEREST    BALANCE
    0                             3000.00
    1       -73.80       39.97    2966.17
    2       -73.80       39.53    2931.90
    3       -73.80       39.06    2897.16
    4       -73.80       38.61    2861.97
    5       -73.80       38.14    2826.31
    6       -73.80       37.66    2790.17
So answer = 2790.17
IF anything else is given as answer, then the interest rate is treated
slightly differently (perhaps simple interest)...
 
  • #5
Wilmer said:
Well, whoever "arranged" the problem simply didn't know what he/she was doing...

IF the payment is 73.80 and the rate is 15.99% annual cpd. monthly,
then what is owing after 6 months is THE ACTUAL BALANCE OWING AFTER 6 PAYMENTS:
Code:
  MONTH    PAYMENT    INTEREST    BALANCE
    0                             3000.00
    1       -73.80       39.97    2966.17
    2       -73.80       39.53    2931.90
    3       -73.80       39.06    2897.16
    4       -73.80       38.61    2861.97
    5       -73.80       38.14    2826.31
    6       -73.80       37.66    2790.17
So answer = 2790.17
IF anything else is given as answer, then the interest rate is treated
slightly differently (perhaps simple interest)...

This makes sense.
 

FAQ: How Much Must John Pay the Bank if He Returns the Loan in Full in 6 Months?

1. How is the interest on a personal bank loan calculated?

The interest on a personal bank loan is typically calculated based on the loan amount, the interest rate, and the length of the loan term. The longer the loan term, the more interest will accrue.

2. What is the average interest rate for a personal bank loan?

The average interest rate for a personal bank loan varies depending on factors such as the borrower's credit score, the loan amount, and the loan term. Generally, interest rates for personal bank loans range from 5% to 36%.

3. How much must John pay in total if he returns the loan in full in 6 months?

The total amount John must pay back on his personal bank loan will depend on the loan amount, the interest rate, and any additional fees or charges. However, if he returns the loan in full in 6 months, he will likely only need to pay back the loan amount plus any accrued interest for that time period.

4. Can John pay off his personal bank loan early?

Yes, most personal bank loans allow borrowers to pay off their loan early without any penalties. However, it's important to check with the bank to confirm their policy on early repayment.

5. Will John's credit score be affected if he returns the loan in full in 6 months?

If John makes all of his payments on time and returns the loan in full in 6 months, his credit score may actually improve. However, if he misses any payments or is late in returning the loan, it could negatively impact his credit score.

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