Question

The following table shows a portion of a three-year amortization schedule. A 3-year amortization schedule. The loan amount or principal is 11,940 dollars and the interest rate is 7.45 percent. At 24 months, the monthly payment is 371 dollars and 13 cents, the principal paid is 342 dollars and 44 cents, the interest paid is 28 dollars and 69 cents, and the balance is 4,278 dollars and 98 cents. After two years, how much has been paid into interest?
a. $4,628.14

b. $1,246.10

c. $978.96

d. $1,912.05

Answer 1

Answer:^

^^^^^^

1,246.10

Step-by-step explanation:

Answer 2

Answer:

• It has been paid $ 1,246.10 into interest (option b.)

Explanation:

The amount paid into interest is the sum of the interest paid every month, but since the table shows only the interest paid month 17 through month 25, you should find snother way to calculate this amount.

You can do it by realizing that the total payments accumlated after 2 years equal the total amount  paid to the principal plus the total amount paid into interest during that time.

Since the payments are constant, you can assert that after two years, i.e. 24 months, the total amount paid is the product of the number of payments by the amount of each payment:

• Total payments = 24 × $ 371.13 = $ 8,907.12

You can know the amount that has gone to principal by subtracting the balance at month 24 ($ 4,278.98) from the loan amount ($11,970.00):

• Payments against principal = $ 11,970.00 - $ 4,278.98 = $ 7,661.02

The payments to interest are the total payments less the payments against the principal:

• Payments to interest = $ 8,907.12 - $ 7,661.02 = $ 1,246.10