Dan buys a new desk for $3,000. Miller will pay back $260 per month. Interest is 5% on the unpaid balance. Calculate balance outstanding after second payment (Use U.S. Rule)
To calculate the outstanding balance after the second payment, we need to know a few things: the initial loan amount, the monthly payment, and the interest rate.
Based on the given information:
- The initial loan amount is $3,000
- The monthly payment is $260
- The interest rate is 5% on the unpaid balance.
We will use the U.S. Rule method for calculating the outstanding balance, which means that the interest is charged on the original loan amount for each payment.
Now, let's break down the calculations:
1. Calculate the interest for the first payment:
- The interest rate is 5% on the unpaid balance, which is currently the entire loan amount of $3,000.
- The interest for the first payment is (5/100) * $3,000 = $150.
2. Subtract the interest from the first payment to determine the amount applied towards the principal:
- The amount applied towards the principal for the first payment is $260 - $150 = $110.
3. Subtract the principal payment from the original loan amount to get the outstanding balance after the first payment:
- The outstanding balance after the first payment is $3,000 - $110 = $2,890.
4. Calculate the interest for the second payment:
- Again, the interest rate is 5% on the unpaid balance, which is $2,890.
- The interest for the second payment is (5/100) * $2,890 = $144.50
5. Subtract the interest from the second payment to determine the amount applied towards the principal:
- The amount applied towards the principal for the second payment is $260 - $144.50 = $115.50
6. Subtract the principal payment from the outstanding balance after the first payment to get the outstanding balance after the second payment:
- The outstanding balance after the second payment is $2,890 - $115.50 = $2,774.50
Therefore, the balance outstanding after the second payment, using the U.S. Rule method, is $2,774.50.