The amount of interest saved by the borrower is $62.61
Step-by-step explanation:
1. To calculate rate of 36 monthly payments,
Principal = $4200
Rate = r%
Time = [tex]\frac{36}{12}[/tex] = 3 years
Interest = $141.17
Formula for calculating interest is,
Interest = [tex]\frac{P*R*T}{100}[/tex]
141.17 = [tex]\frac{4200*r*3}{100}[/tex]
141.17 x 100 = 12,600 x r
r = [tex]\frac{14117}{12,600}[/tex]
r = 1.12%
2. To calculate interest of 20 monthly payments,
Principal = $4200
Rate = 1.12%
Time = [tex]\frac{20}{12}[/tex] = 1.67
Interest = I
Formula of interest --> I = [tex]\frac{P*R*T}{100}[/tex]
I = [tex]\frac{4200*1.12*1.67}{100}[/tex]
I = [tex]\frac{7855.68}{100}[/tex]
I = $78.56
3. Amount of Interest saved = Interest of 36 monthly payments - Interest of 2- monthly payments
Interest saved = 141.17 - 78.56
Interest saved = $ 62.61
Therefore, the amount of interest saved is $62.61
Keywords: Interest rate
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