Question

4-6. Suppose that, in Plan 1 of Table 4-1, $8,500 of the original unpaid balance is to be repaid at the end of months two and four only. How much total interest would have been paid by the end of month four? (44) TABLE 4-1 Three Plans for Repayment of $17,000 in Four Months with Interest at 1% per Month (4)=(2)+(3) Total Money Owed at (1) (3) 1% x (2) Interest Accrued (5) (6)- 3)+(5) Total End-of-Month Amount Owed at Beginning of Month Principal Payment End of Month Payment (Cash Flow) for Month Month Plan 1: Pay interest due at end of each month and principal at end of fourth month. $170 170 170 170 $17,170 17,170 17,170 17,170 $17,000 17,000 17,000 17,000 $170 170 170 17,170 1 $0 0 0 17,000 68,000 Smo $680 (total interest)

Answer 1

The answer for above problem is explained below.

Amount for frst 11 O00 of frst mon th is nterest for end 17,o00xC 1memn) x 1 pex mont) I ooO OEl Givar that he end of fecond mont The Amount paid at balane 8,500 af te poid end of the tuird month is, Inters t 8,500 X 1mon X /. Pes monh) $ 8, J0o X O.O 85

5) (ax . E) C4) Total money oued (2.) (2) + (3) (1) (6) (3) (5) Principal Amount Tnteres owed Mon Hh Total end of at Begining of ACCYued Payment at end of month month Paymeut mon th month 170 $170 000LI Oti'Li 8,670 $8,500 I1,000 $170 $I7, 70 8,500 $0 8585 85 85 $8,500 8585 85 $8,500 8,5 85 510 Total Tnterest that would Paidl by tue end of month ur S I 510 3