Verified answer

it depends on how you repay the loan !

if you repay at the end of 5 years, 6700*(1.135^5 - 1) = $5919.85 <-------

if monthly repayments & monthly compounding,

PMT = 6700*(.01125)/(1- 1.01125^-60) = 154.17

interest = 60*154.17 - 6700 = $2550.20 <------

1

Use the present value of an ordinary annuity formula = (1-1/(1+i)^n)/i

The periodic payment on the loan is the Principal times the formula above.

Given: Principal = 6700, Interest = 13.5%, Years = 5

Assuming annual payments ------- the formula gives (1-1/(1.135)^5)/.135 = 3.457

So the annual payment is (6700 / 3.475) = 1928

Total payments = 5 x 1928 = 9640

Interest = Total payments subtract the prinicpal = 9640 - 6700 = 2940

To determine monthly payment figures using the annuity formula, i = (13.5 / 12) and n = 12 x 5

If monthly payments, then total payments are 60 months x 154 monthly payment = 9250

So total interest = 9250 - 6700 = 2550

By paying monthly you save 390 in interest.