Question 6 (multiple choice)
Suppose you have a 12-month loan of $1,200.00 at 12% interest to purchase a lawn mower and other gardening equipment. Each monthly payment is $106.56. The balance after the fourth payment is $816.04. How much do you save by paying off the loan with the fifth payment?
(Hint: First calculate the payoff: Find the interest on the balance due and add it to the balance due. Add the amount of the first four payments to the payoff in month 5. Finally, compare this total to the monthly payment multiplied by 12.)
