Q # 6 (6 Marks)

Erica and Jon just purchased a boat for $90,000. They were able to make a 10% down payment and the remaining balance was financed. The rate quoted by the bank was 7.2% APR financing with monthly payments. The loan has a 10 year amortization period and a 2 year term. (Timelines are not required.)

Required:

i) What is the monthly payment?

ii) What is the effective annual rate of interest paid?

iii) How much is the balance owing at the end of the 2 year term?