Raul Fletes borrowed 9000 on a 200-day note required ordinary interest at 15.8%. Raul paid 4500 on the mote on the 150th day. How much interest did he save by making the partial payment?
Solution:-
First, calculate the ordinary interest on 150 days.
9000(0.158)(
) = 592.50
The 4500 partial payment is first applied to the interest accumulated on 150 days. The remainder of the partial payment is applied to the principal. Find the amount of partial payment applied to the principal.
4500 – 592.50 = 3907.50
Subtract the amount of the partial payment applied to principal from the original principal.
This is the adjusted principal.
9000 – 3907.50 = 5092.50
During the rest of the period of the loan, which was 50 days, the interest was calculated using the adjusted principal. Find the interest on the adjusted principal at maturity.
5092.50(0.158)(
)
111.75
Add the interest, found on the previous step, to the ordinary interest on 150 days. This is the total interest paid.
111.75 + 592.50 = 704.25
Calculate the amount of interest , if no partial payment was paid.
9000(0.158)(
) = 790.00
To find the interest saved, subtract the total interest paid from the amount of interest if no partial payment was paid.
790.00 – 704.25 = 85.75
Thus, the interest saved is 85.75.