Example 1 Calculate Repayments
Kate obtained a holiday loan of $3500 at 15% p.a flat rate interest to be paid back in fortnightly instalments over 3 years. How much is each instalment?
Interest = PRN
I = $3500 x 0.15 x 3
I = $1575
Total Cost = $3500 +$1575
Total Cost = $5075
Number of instalments = 3 x 26
= 78
Fortnightly Instalment = $5075 / 78
=$65.06410266
=$65.06
- Example 2 Calculate a flat interest rate given the repayments
The Education Credit Union published this table for flat rate loans. Abby borrowed $8000 over 4 years.
a.) How much does she repay per month?
repayment= $28.75 x 8 =$230
b.) What is the total amount to repay the loan?
Total amount of loan = $230 / 48 = $11 040
c.) What is the interest charged?
Interest = $11040 - $8000 =$3040
d.) Calculate the flat interest rate per annum
I=PRN
$3040 = $8000 x R x 4
R=0.095=9.5%