Question

Andres Michael bought a new boat. He took out a loan for $24,120 at 3.25% interest for 2 years. He made a $4,070 partial payment at 2 months and another partial payment of $2,840 at 7 months. How much is due at maturity? (Do not round intermediate calculations. Round your answers to the nearest cent.)

Answer 1

The interest on $ 24120 at 3.25 % for 2 months is $ 24120*(3.25/100)*2/12 = $ 130.65. Thus, after Andres Michael made a partial payment of $ 4070 at 2 months, the loan amount outstanding is $24120+$ 130.65-$ 4070 = $ 20180.65.

The interest on $ 20180.65 for 5 months is $ 20180.65*(3.25/100)*5/12 = $ 273.2796354. Thus, after Andres Michael made a partial payment of $ 2840 at 7 months, the loan amount outstanding is $ 20180.65+ $ 273.2796354-$ 2840 = $ 17613.92964.

The remaining period of loan is 24-7 = 17 months. The interest on $17613.92964 for 17 monrgs is $ 17613.92964 *(17/12)*3.25/100 =$ 810.974677. Hence, the amount due at maturity is $17613.92964 +$810.974677 = $ 18424.90 ( on rounding off to the nearest cent).   

Note:

There is no mention of compounding of interest. Hence simple interest has been calculated.