For the best terms on a loan or credit card, you need a credit score above 700.

Question

For the best terms on a loan or credit card, you need a credit score above 700. To achieve this, start establishing credit now. Pay all of your bills on time. In addition, use only one-third of your available credit limit and pay off your revolving balance(s) each month. R.J.Johnson has excellent credit. She wants to purchase a piece of equipment for her business and was offered 5% for 48 months for the $60,000 unit. What is her monthly payment by add-on method? (Round your answer to the nearest cent.)

Explanation / Answer

Answer: From the problem, we know the following:

P = $6,0000

r = 5%

t = 4 years

First, use the simple interest formula, I=P*R*T

I=60000*5%*4=12000

Therefore, She will pay $12,000 in interest. Next, find the number of monthly payments (n)

n=4*12=48 months

Monthly payment=P+I/n

=60000+12000/48

=72000/48=1500 per month.

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