offer 48 mo. loans at 4.2% compounded monthly to
applicants with good credit ratings.You have a good credit rating & afford
monthly payments of $459.00, how much can you borrow? What is the total
interest you will pay for this loan? round 2 dec
No of months =48
Rate =0.042/12 =.0035
Monthly payment = 459
The present value of such stream of payments = 20248.22
Hence You can borrow $20248.22 i.e $20,248
The total payment in 48 months = 48*459=22032
Total Principal =20248
Total Interest = 22032-20248=1784
Answer : amount that can be borrowed = $20,248
Total Interest =$1784 ( more exactly $1783.78)
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