Use the Actuarial Method to Find the Amount of Unearned

question 123

Multiple Choice

Use the actuarial method to find the amount of unearned interest for the loan paid in full before the due date.
-Amount Financed: $2500 Regular Monthly Payment: $55.61
Total Number of Payments scheduled: 60
Loan repaid in full instead of making: 36th payment

• A)$151.61
• B)$173.24
• C)$153.34
• D)$146.95

---

Definitions:

Subordinated Debentures

A type of debt instrument that ranks below other debts in case of liquidation or bankruptcy.

Debentures

A type of debt instrument that is not secured by physical assets or collateral but is based on the issuer's creditworthiness and reputation.

Junk Bonds

High-yield bonds with a lower credit rating than investment-grade bonds, reflecting a higher risk of default.

Industrial-Development Bond

A government-issued bond to support the development of industrial projects, often tax-exempt for the buyer.