A) how much did she owe the bank on the day of maternity? B) what total amount of Interest did she pay on the loan?

Itâ€™s assumed that 11.5% is the annual rate of interest and there are 365 days in the year for calculation purposes.

On maturity of the note she would have owed 6500*0.115*90/365+6500=6684.32 (6500 plus interest). However she paid off 4000 before the note matured. This will reduce the interest.

Interest between 1 August and 15 September (46 days) comes to 6500*0.115*46/365=94.21 bringing the total to 6594.21. Then she pays off 4000, leaving 2594.21 with 44 days left before maturity. So the interest on this is 2594.21*0.115*44/365=35.96. The total interest is 94.21+35.96=130.17 (compared to 184.32 which she would have paid if the note matured with no payments made).

On 15 September, she owed the bank 6594.21 before her payment of 4000.

After payment of 4000, she owed the bank 2594.21.

(A) On maturity, she owed the bank 2594.21+35.96=2630.17.

(B) Total interest=130.17.

There may be a discrepancy of 1.26 if the first block of interest was after 45 days instead of 46. In this case the total interest would be 128.91 instead of 130.17 and she owed the bank 2628.91 instead of 2630.17.

by Top Rated User (616k points)