Chapter M, Problem 8P

Serial Installments; Amounts Applicable to Interest and Principal Ronald McDuffie purchases a new car at a cost of $14,400. He pays $3,000 down and issues an installment note payable by which he promises to pay the balance in 18 equal monthly installments, which include interest at an annual rate of 18% on the remaining unpaid balance at the beginning of each month starting with the first month after the purchase.

Required:

1. 1. Compute the equal installment payments.
2. 2. Compute the interest that will be paid for each of the first two periods. Indicate the amount of each payment that will be a reduction of principal.