A loan of $4000 is paid off over 9-months at a simple interest rate of r = 8%.The borrower makes partial payments of $150 in 3-months and $2500 in 6-months.Using the declining balance method,what is the final balance due at the end of 9-months?

Question

Quizplus · Accepted Answer

Using the declining balance method, we first need to calculate the outstanding balance after each partial payment.

After 3 months, the outstanding balance is: 
$4000 + ($4000 x 0.08 x (3/12)) - $150 = $3370

After 6 months, the outstanding balance is: 
$3370 + ($3370 x 0.08 x (3/12)) - $2500 = $912.20

Finally, after 9 months (end of loan term), the outstanding balance is: 
$912.20 + ($912.20 x 0.08 x (3/12)) = $981.57

Therefore, the final balance due at the end of 9 months is $981.57, which is closest to option C ($1538.77). However, none of the given options match the correct answer obtained through calculation.

A Loan of $4000 Is Paid Off Over 9-Months at a Simple