Answer:
To calculate the interest, final payment, and savings from paying off the loan early, we need to break down the given information step by step.
1. Calculate the total interest:
The total interest paid on a simple interest loan can be calculated using the formula: Interest = Principal x Rate x Time.
In this case, the principal (P) is $3,600.00, the rate (R) is 8% (or 0.08), and the time (T) is 12 months.
So, Interest = $3,600.00 x 0.08 x 12 = $2,304.00.
2. Determine the final payment:
The final payment can be found by subtracting the remaining balance from the next scheduled payment.
After 6 payments, the balance is $1,835.62, and the next payment is $313.20.
Therefore, Final Payment = $313.20 - $1,835.62 = -$1,522.42.
(Note: The negative value indicates that Lillian will receive this amount as she has overpaid.)
3. Calculate the savings from paying off the loan early:
To find out how much Lillian saves by paying off the loan early, we need to compare the total interest paid with the remaining balance plus the final payment.
Remaining Balance = $1,835.62
Total Interest Paid = $2,304.00
Final Payment = -$1,522.42
Savings = Total Interest Paid - (Remaining Balance + Final Payment)
Savings = $2,304.00 - ($1,835.62 + (-$1,522.42))
Savings = $2,304.00 - $313.20
Savings = $1,990.80.
In summary:
- The interest on this loan is $2,304.00.
- The final payment is -$1,522.42 (indicating an overpayment).
- Lillian saves $1,990.80 by paying off the loan early.
Explanation: