Ch 07: En Average: 12 Miguel Perez of Pamona, California, obtained a two-year in

Question

Ch 07: En Average: 12 Miguel Perez of Pamona, California, obtained a two-year installment loan for $1,600 to buy a television set eight months ago. The loan had a 10.3 percent APR and a finance charge of $177.20. His monthly payment is $74.05. Miguel has made eight monthly payments and now wants to pay off the remainder of the loan. The lender will use the rule of 78s method to calculate a prepayment penalty How much will M O el need to give the lender to pay off the loan? Do not round intermediate calculations. Round your answer to the nearest cent. Use rounded answer for later calculations. of saving

Explanation / Answer

a) amount of finance charge paid = 164/300*177.2 = 96.86933 (A) total amount paid = 74.05*8 = 592.4 C less (A) = 495.5306667 (B) amount still owed = 1600 - B = 1104.47 Ans: 1104.47 b) amount of finance charge = 177.2*0.33 = 58.476 (D) amount of principal paid = C-D = 533.924 (E) amt remaining = 1600-E = 1066.076 Prepayment penalty = 1104.47- 1066.076 = 38.39 Ans: 38.39

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