With a(n) the add-on method is a widely used technique for computing interest on installment loan, interest charges are calculated using the original balance, and these charges are then added to the loan.
Add-on method:
1. A common approach for calculating interest on installment loans is the add-on method. When using the add-on technique, the indicated interest rate is applied to the loan's original balance to determine interest.
Reason:
When applying for a loan or mortgage, the calculation method called add-on interest is used. The interest due on the loan is determined using this method at the beginning of the loan. The principal is increased once the interest has been calculated. The principal and interest are both repaid along with the loan when the borrower repays it.
Financial institutions benefit from the add-on approach because even if the borrower pays off the loan early, the bank will still receive the full interest payment. As a result, interest is always computed on the principle, or the original loan amount, rather than the current balance.
2. Where F, is the finance charge for the loan, and the loan's length is measured in years.
Reason: An annual rate is always used to express interest rates. As a result, the loan's term will likewise be calculated annually.
Learn more about add-on method here brainly.com/question/18437550
#SPJ4