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Josef took a loan from Banco Verde to start his business selling clothing. The following table show the payments and interest for 3 months on this loan account. The initial loan was $185. Assume the interest rate is 1% per month (12% APR) and that the interest is charged on the balance from the previous month. Fill in the blanks. Round your answers to two decimal places.Month Payment Interest Balance0 - - $1851 $37 $1.85 2 $25 3 $40

Question

Josef took a loan from Banco Verde to start his business selling clothing. The following table show the payments and interest for 3 months on this loan account. The initial loan was 185.Assumetheinterestrateis1185. Assume the interest rate is 1% per month (12% APR) and that the interest is charged on the balance from the previous month. Fill in the blanks. Round your answers to two decimal places.Month Payment Interest Balance0 - - 1851 3737 1.85 2 25325 3 40

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Solution

For Month 2:

Step 1: Calculate the balance after the first payment. The initial balance was 185.Afterapaymentof185. After a payment of 37, the new balance is 185−185 - 37 = $148.

Step 2: Calculate the interest for the second month. The interest rate is 1% per month, so the interest is 148∗0.01=148 * 0.01 = 1.48.

Step 3: Calculate the balance after the second payment. After a payment of 25,thenewbalanceis25, the new balance is 148 + 1.48−1.48 - 25 = $124.48.

For Month 3:

Step 4: Calculate the interest for the third month. The interest rate is 1% per month, so the interest is 124.48∗0.01=124.48 * 0.01 = 1.24.

Step 5: Calculate the balance after the third payment. After a payment of 40,thenewbalanceis40, the new balance is 124.48 + 1.24−1.24 - 40 = $85.72.

So, the table should look like this:

Month Payment Interest Balance 0 - - 1851185 1 37 1.851.85 148 2 2525 1.48 124.483124.48 3 40 1.241.24 85.72

This problem has been solved

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