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Anna Levandowski took out a $4,000 simple interest loan at 8% interest for 24 months to buy a wave runner. Her monthly payment is $180.91. After making payments for 9 months, her balance is $2,574.21. She decides to pay the loan off with her next payment. How much will her final payment be? How much interest will she save?

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Answer:

Anna's final payment will be $2,574.21, which is the remaining balance on the loan.

Explanation:

To calculate the amount of interest Anna will save by paying off the loan early, we need to first calculate the total amount of interest she would have paid if she had made all the scheduled payments. To do this, we can multiply the loan amount by the interest rate and the number of months the loan was taken out for:

$4,000 * 8% * 24 months = $768

Since Anna paid off the loan early, she will not pay all of this interest. The amount of interest she will save is the difference between the total interest and the amount of interest she has already paid. To calculate the amount of interest Anna has already paid, we can multiply the number of payments she has made by the interest portion of her payment:

9 payments * ($180.91 - $180.91 * 0.08) = $935.82

The amount of interest Anna will save is the difference between the total interest and the amount of interest she has already paid:

$768 - $935.82 = -$167.82

Anna will save a negative amount of $167.82 in interest because she has already paid more in interest than she would have if she had made all the scheduled payments.

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