Question

Shawn Bixby borrowed $22,000 on a 150-day, 13% note. After 75 days, Shawn paid $2,500 on the note. On day 106, Shawn paid an additional $4,500. Use ordinary interest. Determine the total amount paid by Shawn at day 106 and explain the calculation using ordinary interest.

Answer 1

Shawn Bixby borrowed $22,000 on a 150-day, 13% note. After 75 days, Shawn paid $2,500 on the note. On day 106, Shawn paid an additional $4,500. To calculate the total amount paid by Shawn at day 106, we need to calculate the interest on the remaining balance of the loan. First, calculate the interest on the remaining balance after 75 days. Next, subtract the amount paid on day 75 from the remaining balance. Now, calculate the interest on the remaining balance after 106 days. Finally, add the principal, interest, and the additional payment on day 106 to calculate the total amount paid by Shawn.

Step-by-step explanation:

Shawn Bixby borrowed $22,000 on a 150-day, 13% note. After 75 days, Shawn paid $2,500 on the note. On day 106, Shawn paid an additional $4,500.

To calculate the total amount paid by Shawn at day 106, we need to calculate the interest on the remaining balance of the loan.

First, calculate the interest on the remaining balance after 75 days:

1. Calculate the interest for 75 days using the formula: Interest = Principal x Rate x Time
2. Substitute the values: Interest = $22,000 x 0.13 x (75/365)
3. Calculate the interest: Interest = $749.32

Next, subtract the amount paid on day 75 from the remaining balance:

1. Subtract $2,500 from $22,000 - $2,500 = $19,500

Now, calculate the interest on the remaining balance after 106 days:

1. Calculate the interest for 106 days using the formula: Interest = Principal x Rate x Time
2. Substitute the values: Interest = $19,500 x 0.13 x (31/365)
3. Calculate the interest: Interest = $210.96

Finally, add the principal, interest, and the additional payment on day 106 to calculate the total amount paid by Shawn:

1. Add $19,500 + $210.96 + $4,500 = $24,210.96