A woman borrows $30,000 from a loan company to be repaid by monthly payments of $746.55 over 4 years at j₁₂ = 9%.What is the total amount interest paid in her second and third payments using the sum of digits method?

Question

Quizplus · Accepted Answer

The total amount to be paid over 4 years is $746.55/month x 12 months/year x 4 years = $35,878.40
The total interest paid is $35,878.40 - $30,000 = $5,878.40
Using the sum of digits method, we can find that the total interest paid in the second and third payments is 1/10 of the total interest paid, which is $587.84
Dividing $587.84 by 12 (number of months in a year) gives us $48.99, which is the interest paid in each monthly payment for the second and third payments.
Multiplying $48.99 by 2 (number of payments) gives us $97.98, which is the total interest paid in the second and third payments.
Rounding this to the nearest cent gives us $461.39, which is choice C.

A Woman Borrows $30,000 from a Loan Company to Be