A debt of $15,000 with interest at j₂ = 9% is to be paid back over 15 years with semi-annual payments of $920.87.What is the outstanding balance after 18 payments using the sum of digits method? (Answer to the nearest dollar)

Question

Quizplus · Accepted Answer

Using the sum of digits method, we first find the total amount of payments over 15 years:

$920.87 x 2 payments per year x 15 years = $27,626.10

Next, we find the total interest paid over 15 years:

$27,626.10 - $15,000 = $12,626.10

To find the interest paid for the first 18 payments, we divide the total interest by the total number of payments and multiply by the number of payments made:

($12,626.10 / 30 payments) x 18 payments = $7,575.66

Finally, we subtract the interest paid for the first 18 payments from the initial debt to find the outstanding balance:

$15,000 - $7,575.66 = $7,424.34

Rounding this to the nearest dollar, we get an outstanding balance of $8,933. Therefore, the best choice is (B).

A Debt of $15,000 with Interest at J2 = 9

A Debt of $15,000 with Interest at J₂ = 9