Richard borrowed $1,250 for two years at 14% a year under an add-on plan. He repaid the loan, including interest, in 24 equal payments. How much was each payment?
First you need to use the compound interest formula to work out the amount of money he had after those two years. To do this you have to make a multiplier for the 14% and you have to put the number of years to the power of the multiplier and of course you need to times the original amount by the multiplier: (100+14)/100 = 1.14 (making the multiplier)
1250*(1.14)^2 = 1624.5
Then you divide the 1624.5 by 24 to get the equal payments: 1624.5/24 = $67.6875 (rounded to $67.69)
Richard made payments of $67.69 24 times to pay off the loan he had taken out.
