Question

Given Principal: $11,500, 11%, 240 days

Partial payments: On 100th day, $4,400


On 180th day, $2,700


a. Use the U.S. Rule to solve for total interest cost. (Use 360 days a year. Do not round intermediate calculations. Round your answer to the nearest cent.)

Answer 1

The U.S. Rule is used to calculate the interest on a loan based on a 360-day year.

Interest for the first partial period (100 days) is calculated as:

$11,500 x 0.11 x (100/360) = $355.83

The balance of the loan after the first partial payment is:

$11,500 - $4,400 = $7,100

Interest for the second partial period (80 days) is calculated as:

$7,100 x 0.11 x (80/360) = $139.78

The balance of the loan after the second partial payment is:

$7,100 - $2,700 = $4,400

Interest for the third partial period (60 days) is calculated as:

$4,400 x 0.11 x (60/360) = $81.33

The total interest cost is the sum of the interest for each partial period:

$355.83 + $139.78 + $81.33 = $576.94

The answer is $576.94.