Answer:
a) Current month's interest is: $40
b) The final payment is $7,440
c) Amount saved by paying off loan early is: $600
Step-by-step explanation:
Principal = $6,000
Interest rate = 8% or 0.08
Time = 36 months or 3 years
After 20 payments, the payment is $2,849.08.
a) What is the CURRENT month's interest?
The formula used to find the interest is:
I = P*r*t
Where P= Principal Amount
r = interest rate
and t = time in years
Putting the given values:
I = 6,000 * 0.08 * 3
I = 1440
Total Interest = $1440
Current Month interest = 1440/36
Current Month interest = 40
So, Current month's interest is: $40
b) What is the final payment?
The formula used is:
A = P(1+r*t)
A = 6,000(1+0.08*3)
A = 6000*(1.24)
A = 7,440
So, the final payment is $7,440
c) How much is saved by paying off the loan early?
The current balance paid is $2,849.08
The loan is paid when next payment is due.
So, remaining amount to be paid is:
Remaining Amount = Final Payment - Current balance paid
Remaining Amount = 7,440 - 2,849.08
Remaining Amount = 4,590.92
Remaining months in which amount is to be paid: 36-20 = 16 months
The loan is paid off next month so interest rate of remaining 15 months = 15*40 = 600
The amount paid on next payment = 4590.92 - 600 = $3990.9
So, amount saved by paying off loan early is: $600
