Chapter 9.2, Problem 76E

(a)

To determine

To find the first year’s monthly payments and the unpaid balance after each month.

Explanation of Solution

Consider the loan of $5000 and agreed to pay $250 per month plus 1% interest on the unpaid balance then, payment for the first month is,

  

The unpaid balance is

Payment for the second month is,

  

The unpaid balance is

Similarly, for the first 12 months the monthly payment and unpaid balance is

  

(b)

To determine

To find the total amount of the loan paid over the term of the loan.

Answer to Problem 76E

The total interest is

Explanation of Solution

Interest paid for the first three months is,

  

Writing in a arithmetic series form,

  

The first termand the differenceis,

  

Sum of n terms for arithmetic series,

  

Here n is total number of months,

  

Hence,

  

Therefore, total amount of interest paid is