Question

1. "Lisa took out a loan for $16,400. This was 3 years ago. Her monthly payments for that loan were $674.35. Since Lisa had filed for bankruptcy several years prior, she

better credit rating her payments could have been $451.88 per month. How much more in interest did Lisa end up paying for her loan because of her bankruptcy?
Hint: 1st since you know how much Lisa paid per month, what was the total amount, with interest, that she paid in 3 years?
2nd, what was the total amount she would have paid in 3 years if she didn't have bankruptcy?
3rd, find the difference between those two and that is your answer.
a.
b.
C.
d.
$5,836.80
$8092.20
$8,008.92
$7,004.16

Answer 1

We can use the formula for compound interest to find the total amount that Lisa paid in 3 years for the loan, with interest.

P = 16400 (the principal amount)
r = (674.35/month) / (12 months/year) = 0.05619 (monthly interest rate)
n = 3 years x 12 months/year = 36 (total number of payments)

Using the formula:

A = P(1 + r/n)^(n*t)
where A is the total amount paid, and t is the time in years.

A = 16400 (1 + 0.05619/12)^(12*3)
A = $24,703.60

So Lisa paid a total of $24,703.60 for the loan, with interest.

If Lisa had a better credit rating and made payments of $451.88 per month, then the total amount she would have paid in 3 years would be:

P = 16400 (the principal amount)
r = (451.88/month) / (12 months/year) = 0.03766 (monthly interest rate)
n = 3 years x 12 months/year = 36 (total number of payments)

Using the same formula:

A = P(1 + r/n)^(n*t)
A = 16400 (1 + 0.03766/12)^(12*3)
A = $18,866.80

So Lisa would have paid a total of $18,866.80 if she had a better credit rating.

The difference between these two amounts is:

$24,703.60 - $18,866.80 = $5,836.80

Therefore, the amount that Lisa paid more in interest because of her bankruptcy is $5,836.80.

The correct answer is A) $5,836.80.