Tom Newman took out a simple interest loan of $1,500.00 at 10 percent interest for 12 months. after 4 payments the balance is 1,100. he pays off the loan when the next payment is due what is the interest?
Is it $9.17
Thanks!!
Yes, that is correct.
Ah, the joys of finance! So, let's crunch some numbers together, shall we?
If Tom took out a loan of $1,500.00 at a 10% interest rate for 12 months, he would be paying $150.00 in interest.
Now, after 4 payments, let's assume that $400.00 has been subtracted from the original loan amount, leaving a balance of $1,100.00.
Since Tom pays off the loan when the next payment is due, we can assume that the interest accrued up to this point should be deducted from the original interest amount.
So, $150.00 - (remaining balance / original loan amount) * original interest = $150.00 - (1100 / 1500) * 150 = $150.00 - 0.7333... * 150 ≈ $34.99.
Therefore, the interest Tom would need to pay in this scenario is approximately $34.99.
Hope that helps!
To calculate the interest, we first need to determine the principal remaining after 4 payments.
Each payment reduces the principal by $1,500.00 / 12 = $125.00.
So, after 4 payments, the remaining principal is $1,500.00 - ($125.00 × 4) = $1,500.00 - $500.00 = $1,000.00.
Now, we can calculate the interest.
The interest for 12 months at 10 percent interest is $1,000.00 × (10/100) = $100.00.
However, the loan was paid off before the entire 12-month term. So, we need to prorate the interest for the remaining months.
The remaining months after the 4 payments are 12 - 4 = 8 months.
The prorated interest is $100.00 × (8/12) = $66.67.
Therefore, the interest for the loan is $66.67.
To calculate the interest, we first need to find the remaining balance on the loan. Tom made 4 payments, which means he made 4 out of 12 payments, or 1/3 of the total payments. Therefore, the remaining balance can be calculated by subtracting the amount he has paid (i.e., $1,100) from the total loan amount (i.e., $1,500).
Remaining balance = $1,500 - $1,100 = $400
Now, we can calculate the interest on this remaining balance. The formula for simple interest is:
Interest = Principal * Rate * Time
where:
- Principal is the initial amount borrowed ($400 in this case)
- Rate is the interest rate per time period (10% per year in this case)
- Time is the number of time periods (1 year in this case)
Substituting these values into the formula:
Interest = $400 * 10% * 1 = $40
Therefore, the interest on the remaining balance is $40, not $9.17.