Trevor asks his bank for a loan of $22000 to add a guest
room to his house. His bank offers financing at 7.25%
compounded monthly, for a term of 5 years, payable
monthly. What is Trevor's monthly payment?

$526.3 is the monthly payment

Step-by-step explanation:

We use the compound interest formula to calculate the total amount payable on the loan.

Mathematically;

A = P(1 + r/n)^nt

Where A is the amount to pay

P is amount borrowed = 22,000

r is interest rate = 7.25/100 = 0.0725

t is years = 5 years

n is the number of times we compound lee year = 12 times since it’s monthly

Substituting these values, we have

A = 22,000(1 + 0.0725/12)^(12)(5)

A = 22,000(1 + 0.006041666666667)^60

A = $31,578

Monthly payment is total amount/ number of months

There are sixty months in 5 years

So monthly payment is 31578/60 = $526.3

16 is the absolute value

step-by-step explanation:

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