Answer:
- Nicole pays $629.29 per month
- Zack pays $563.24 per month
Step-by-step explanation:
We're not quite sure why you estimated the monthly payment at several times the value of the entire loan.
The applicable formula is the amortization formula. It computes the monthly payment A on loan principal value P at annual rate r for t years to be ...
A = P(r/12)/(1 -(1 +r/12)^(-12t))
The value of r used in this formula is the decimal equivalent of the percentage rate. 7.5% = 0.075; 9% = 0.09
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a)
The formula with Nicole's numbers filled in looks like ...
A = $90,000(0.075/12)/(1 -(1 +0.075/12)^(-12·30))
= $90,000(0.00625)/(1 -(1.00625^-360)) = $562.50/(1 -0.1051398)
A ≈ $629.293 ≈ $629.29 . . . . Nicole's monthly payment
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b)
Using the same formula with P=$70,000, r=0.09, t=30, we find Zack's monthly payment to be $563.24.
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Additional comment
If you're doing a number of problems of this type, it can be helpful to use a tool that will do the calculation for you without error. A graphing calculator or spreadsheet can do that. One example is shown in the attachment.
