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mmi mmi
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Billy North loaned $2,250 to his former college roommate, Jerold Weinsted. Jerold agreed to repay the principal in three monthly installments of $750 each. Billy charged interest at 0.5% (monthly rate) on the unpaid balance each month. Complete the North-Weinsted loan payment schedule. Then use the North-Weinsted loan payment schedule to solve the effective rate problem.

  UnpaidInterestPrincipalTotalNew
 
Month
BalancePaymentPaymentPaymentBalance
a.
1
____________$750____________
b.
2
____________$750____________
c.
3
____________$750____________
  ------------------   
 Total____________   
  
d.Compute the effective annual interest rate in the North-Weinsted loan agreement by using
  
 pr019-1.jpg
  
 where P is the average principal over the 3-month period, I is the total amount of interest, and T is 3/12 year.
Textbook 
Contemporary Business Mathematics for Colleges

Contemporary Business Mathematics for Colleges


Edition: 16th
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pipi123pipi123
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More solutions for this book are available here

a.$2,250 ´ 0.5%    =$11.25 Interest Payment 
 $750 + $11.25    =$761.25 Total Payment 
 $2,250 - $750    =$1,500 New Balance 
    
b.$1,500 ´ 0.5%   =$7.50 Interest Payment 
 $750 + $7.50     =$757.50 Total Payment 
 $1,500 - $750    =$750 New Balance 
    
c.$750 ´ 0.5%      =$3.75 Interest Payment 
 $750 + $3.75      =$753.75 Total Payment 
 $750 - $750       =$0 New Balance 
  
d.$2,250 + $1,500 + $750 = $4,500;
 P = $4,500 ¸ 3 = $1,500
 I = $11.25 + $7.50 + $3.75 = $22.50
 R = $22.50 ¸ ($1,500 ´ 0.25) = $22.50 ¸ $375 = 0.06 or 6%
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