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: 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) $1,086 interest on an 18-month loan; pay off loan after 12 months $ (b) $340 interest on a 2-year loan with 10 payments remaining $ (c) $10,600 borrowed at 11% on a 4-year loan with 36 months remaining $ (d) $54,000 borrowed at 10% on a 5-year loan with 18 payments remaining $
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: 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) $1,086 interest on an 18-month loan; pay off loan after 12 months $ (b) $340 interest on a 2-year loan with 10 payments remaining $ (c) $10,600 borrowed at 11% on a 4-year loan with 36 months remaining $ (d) $54,000 borrowed at 10% on a 5-year loan with 18 payments remaining $
Advanced Engineering Mathematics
10th Edition
ISBN:9780470458365
Author:Erwin Kreyszig
Publisher:Erwin Kreyszig
Chapter2: Second-order Linear Odes
Section: Chapter Questions
Problem 1RQ
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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:
INTEREST REBATE =
× FINANCE CHARGE
| 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.)
(a) $1,086 interest on an 18-month loan; pay off loan after 12 months
$
(b) $340 interest on a 2-year loan with 10 payments remaining
$
(c) $10,600 borrowed at 11% on a 4-year loan with 36 months remaining
$
(d) $54,000 borrowed at 10% on a 5-year loan with 18 payments remaining
$
$
(b) $340 interest on a 2-year loan with 10 payments remaining
$
(c) $10,600 borrowed at 11% on a 4-year loan with 36 months remaining
$
(d) $54,000 borrowed at 10% on a 5-year loan with 18 payments remaining
$
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