Sun Jung finances a sofa for $1,125 by taking out an installment loan for 60 months. The payments were $28.12 per month and the total finance charge was $562.20. After 24 months, Sun Jung decided to pay off the loan. After calculating the finance charge rebate, find her loan payoff.

Sun Jung finances a sofa for $1,125 by taking out an installment loan for 60 months. The payments were $28.12 per month and the total finance charge was $562.20. After 24 months, Sun Jung decided to pay off the loan. After calculating the finance charge rebate, find her loan payoff.

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Concept explainers

Cost of Credit

The cost of credit is an extra amount that the borrower has to pay besides the loan amount. These credit charges may vary from loan to loan. The cost of credit includes interest charges, maintenance charges, and arrangement charges. Some of the costs are mandatorily collected by the lender based on the loan amount and tenure of the loan. The cost of credit is also called finance charges of the credit.

Question

Sun Jung finances a sofa for $1,125 by taking out an installment loan for 60 months. The payments were $28.12 per month and the total finance charge was $562.20. After 24 months, Sun Jung decided to
pay off the loan. After calculating the finance charge rebate, find her loan payoff.

Expert Solution

Step 1

Computation:

Step 2

Step 3

Hence, the loan pay-off is $807.72.

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