instead you are told the interest rebate is only $23.40. What happened? Look at the fine print on the contract. It says interest will be refunded according to the Rule of 78. The formula for the rebate is as follows: INTEREST REBATE = k(k + 1) n(n + 1) × FINANCE CHARGE where k is the number of payments remaining and n is the total number of payments. Determine the interest rebate on the following. (Round your answers to the nearest cent.) (a) $1,076 interest on an 18-month loan; pay off loan after 12 months
With a typical installment loan, you are asked to sign a contract stating the terms of repayment. If you pay off the loan early, you are entitled to an interest rebate. For example, if you finance $500 and are charged $90 interest (APR 8.46%), the total to be repaid is $590 with 24 monthly payments of $24.59. After 1 year, you decide to pay off the loan, so you figure that the rebate should be $45 (half of the interest for 2 years), but instead you are told the interest rebate is only $23.40. What happened? Look at the fine print on the contract. It says interest will be refunded according to the Rule of 78. The formula for the rebate is as follows:
| k(k + 1) |
| n(n + 1) |
where k is the number of payments remaining and n is the total number of payments. Determine the interest rebate on the following. (Round your answers to the nearest cent.)
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