Question

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3. Loan repayment. If you borrow $4,800 and repay the loan by paying $200 per month to reduce the loan and 1% of the unpaid balance each month for the use of the money, what is the total cost of the loan over 24 months? (Ans. : $600]

Answer 1

Cost of loan is interest @ 1% per month on unpaid balance.

Calculation-

Month	Unpaid balance	Interest@1%
1	4800	48
2	4600	46
3	4400	44
4	4200	42
5	4000	40
6	3800	38
7	3600	36
8	3400	34
9	3200	32
10	3000	30
11	2800	28
12	2600	26
13	2400	24
14	2200	22
15	2000	20
16	1800	18
17	1600	16
18	1400	14
19	1200	12
20	1000	10
21	800	8
22	600	6
23	400	4
24	200	2
	Total	600