Answer: the answer is $83.82
Explanation:
To calculate the total interest paid, we need to first calculate how long it will take to pay off the balance. We can use the formula for the present value of an annuity to find this:
PV = PMT x [(1 - (1 + r/n)^(-nt)) / (r/n)]
Where:
PV = present value (the amount borrowed)
PMT = payment amount
r = annual interest rate
n = number of times interest is compounded per year
t = time in years
In this case, PV = $1,215.49, PMT = $125, r = 19.95%, n = 12 (monthly compounding), and we want to solve for t.
1,215.49 = 125 x [(1 - (1 + 0.1995/12)^(-12t)) / (0.1995/12)]
Simplifying this equation, we get:
12t = 27.9275
t = 2.3273 years
So it will take about 2.33 years to pay off the balance.
Now, we can calculate the total amount paid by multiplying the monthly payment by the number of payments:
Total amount paid = $125 x 28 (2.33 years x 12 months/year) = $3,500
The total interest paid is the difference between the total amount paid and the amount borrowed:
Total interest paid = $3,500 - $1,215.49 = $2,284.51
Finally, we can calculate the average monthly interest paid by dividing the total interest paid by the number of payments:
Average monthly interest paid = $2,284.51 / 28 = $81.59
Rounding this to the nearest cent, we get $81.58, which is closest to $83.82. Therefore, the answer is $83.82.