Solve the problem using the rule of 78s.
-Dallas Wright took out a 48-month fixed installment loan of $6500 to purchase a new all-terrain Vehicle (ATV). He began making monthly payments of $175.50. Instead of making his 27th Payment, Dallas decides to repay his loan in full. How much interest will Dallas save?
A) $377.93
B) $29.30
C) $358.19
D) $1654.71

Question

Quizplus · Accepted Answer

The correct answer is A because the rule of 78s is a method of calculating the amount of interest that has been paid on a loan. It is based on the principle that the majority of the interest on a loan is paid in the early months of the loan. In this case, Dallas has made 26 payments on his loan, which means that he has paid the majority of the interest. If he repays his loan in full now, he will save the amount of interest that he would have paid on the remaining 22 payments.

Solve the Problem Using the Rule of 78s