Explanation Given: Principal amount, P = $ 845.32 Rate of interest, r = 1.19 % per month. Minimum payment is interest due plus 2% of the principal balance. Formula used: The percentage formula, 1 percentage = 1 100 . Calculation: Obtain the balance amount after 6 months of minimum payments. From the given, the principal amount is P = $ 845.32 and the rate of interest is r = 1.19 % and the minimum payment is interest due plus 2% of the principal balance. 2 percentage = 2 100 = 0.02 The 2% of the principal amount on Month 1 is computed as follows, The 2% of the principal amount = Rate of interest 100 × Principal amount = 2 100 × 845.332 = 0.02 × 845.32 = 16.91 Therefore, the 2% of the principal amount is 16.91. On the Month 1 the balance amount is computed as follows. The balance amount = Principal amount - Rate of interest = 845.32 − 16.91 = 828.41 Therefore, Month 1 balance amount is $828.41 which is the principal amount. The 2% of the principal amount on Month 2 is computed as follows, The 2% of the principal amount = Rate of interest 100 × Principal amount = 2 100 × 828.41 = 0.02 × 828.41 = 16.57 Therefore, the 2% of the principal amount is 16.57. The balance amount for Month 2 is computed as follows, The balance amount =Principal amount - Rate of interest = 828.41 − 16.57 = 811.84 Therefore, the balance amount on the Month 2 is $811.84 which is taken as the principal amount. The 2% of the principal amount is computed as follows, The 2% of the principal amount = Rate of interest 100 × Principal amount = 2 100 × 811.84 = 0.02 × 811.84 = 16.24 Therefore, the 2% of the principal amount for the month 3 is 16.24. The balance amount On the Month 3 is computed as follows, balance amount = principal amount - rate of interest = 811

3rd Edition

ISBN: 9780073519678

Author: David Sobecki Professor, Allan G. Bluman

Publisher: McGraw-Hill Education

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Chapter 8, Problem 55RE

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Chapter 8, Problem 54RE

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The balance amount after 6 months of minimum payments.

Solution Summary: The author calculates the balance amount after 6 months of minimum payments. The principal amount is 828.41, the rate of interest is 1.19%, and the minimum payment is interest due plus 2% of the principal balance.

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