Solve the Problem

question 172

Multiple Choice

Solve the problem. Use an annual percentage rate table if necessary.
-Joan used a fixed installment loan from her bank to finance her home renovation project. She Borrowed $11,000 and has a 60 monthly payments of $212.67 each. Instead of making her 36th Payment, Joan decides to pay the remaining balance on the loan. How much interest will Joan save (use the actuarial method) ?

• A) $325.12
• B) $305.65
• C) $292.92
• D) $309.34

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Definitions:

Interest Expense

The cost incurred by an entity for borrowed funds, which is recognized in the financial statements as an expense.

Times Interest Earned Ratio

A financial metric that measures a company's ability to cover its interest expenses with its earnings before interest and taxes.

Net Income

The total profit of a company after all expenses, including taxes and operating costs, have been deducted from total revenue.

Equity Multiplier

A financial leverage ratio that measures the portion of a company’s assets that is financed by stockholders' equity.