A small business owner visits his bank to ask for a loan. The owner states that she can repay a loan at $1,500 per month for the next 3 years and then $500 per month for three years after that. If the bank is charging customers 10 percent APR, how much would it be willing to lend the business owner?

The bank will be willing to lend $ 28,800 to the business owner.

Explanation:

Given that a small business owner visits his bank to ask for a loan, and the owner states that she can repay a loan at $ 1,500 per month for the next 3 years and then $ 500 per month for three years after that, since the bank is charging customers 10 percent APR, to determine how much the business owner would be willing to lend the following calculation must be performed:

1500 x 12 x 3 + 500 x 12 x 3 = X

18000 x 3 + 6000 x 3 = X

54000 + 18000 = X

72000 = X

10 x 6 = 60

100 - 60 = 40

100 = 72000

40 = X

40 x 72000/100 = X

28800 = X

Therefore, the bank will be willing to lend $ 28,800 to the business owner.

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