Question

You buy a motorcycle on July 1 for $2,500 with $500 down. You agree to pay the seller the remaining $2,000 at 9% with monthly payments of $341.14. Your first payment is due August 1, but you make the payment on August 4. Using the U.S. Rule, calculate the remaining balance after that payment. Show your work.

$1,673.86

$1,675.63

$1,675.86

$1,677.93

Answer 1

Given,

Loan amount = $2000

Interest rate = 9%

Monthly payment = $341.14

Solution :-

Interest period would be 34 days for the first payment. (From July 1 to August 3)

So,

Interest for first monthly payment = Loan amount x interest rate x 34 days/365 days

= $2000 x 9% x 34 days/365 days = $16.77

Principal included in first monthly payment = $341.14 - $16.77 = $324.37

Now,

Remaining balance after that payment = Loan amount - Principal included in first monthly payment

= $2000 - $324.37

= $1675.63