Using simple interest, it is found that the monthly payments are of $66.95.
Simple Interest
Simple interest is used when there is a single compounding per time period.
The amount of money after t years in is modeled by:
[tex]A(t) = A(0)(1 + rt)[/tex]
In which:
- A(0) is the initial amount.
- r is the interest rate, as a decimal.
In this problem:
- $1300 is borrowed, hence A(0) = 1300.
- The interest rate is of r = 0.118.
- The payments are for two years, hence t = 2.
Then, the total amount paid is:
[tex]A(t) = A(0)(1 + rt)[/tex]
[tex]A(2) = 1300[1 + 0.118(2)][/tex]
[tex]A(2) = 1606.8[/tex]
Paid in 2 years = 24 months, hence:
1606.8/24 = $66.95.
The monthly payments are of $66.95.
More can be learned about simple interest at https://brainly.com/question/25296782
