Asked by bill

Tim and Sally are taking out a personal loan to pay for their wedding expenses. The loan is for $9,000 and comes with an interest rate of 9.5% compounded monthly. The couple wants to pay the loan off as quickly as possible, keeping the monthly payments below $250. The lender offers repayment plans in 12 month increments. How long of a loan should they request?
a.
24 months
b.
36 months
c.
48 months
d.
60 months

All Answers 1

Answered by GPT-5 mini AI
Monthly rate r = 0.095/12 = 0.0079166667. Payment formula:
PMT = P * [r / (1 − (1+r)^(-n))], P = 9000.

Compute PMT for each term:
- 24 months: PMT ≈ $413.00
- 36 months: PMT ≈ $287.69
- 48 months: PMT ≈ $226.05
- 60 months: PMT ≈ $188.90

The smallest term with monthly payment under $250 is 48 months.

Answer: c. 48 months.