9) Rohan used a fixed installment loan from his bank to buy new living room furniture....

9) Rohan used a fixed installment loan from his bank to buy new living room furniture. He borrowed $9250 and has 48 monthly payments of $230.19 each. a. Find the APR of the loan. b. Instead of making his 18th payment, Rohan decides to pay the remaining balance on the loan. How much interest will Rohan save?

Expert Solution

1. Using hit and trial in excel worksheet in the given format below, APR can be calculated.

In this case, APR = 9%

2. If Rohan decides to pay the remaining balance of loan at the time of making his 18th payment, he will be able to save = $ 790.

For calculations, please refer screenshots below.


Principal Amount		$ 9,250
Interest Rate per annum		9.00%
Period - Total Months		48
Monthly Payment		230.19	($230.19)


Year	Opening Principal	Interest	Principal Repayment	Annual Payment	Outstanding Balance
0	$ 9,250	$ -	$ -	$ -	$ 9,250
1	$ 9,250	$ (69)	$ (161)	$ (230)	$ 9,089
2	$ 9,089	$ (68)	$ (162)	$ (230)	$ 8,927
3	$ 8,927	$ (67)	$ (163)	$ (230)	$ 8,764
4	$ 8,764	$ (66)	$ (164)	$ (230)	$ 8,599
5	$ 8,599	$ (64)	$ (166)	$ (230)	$ 8,434
6	$ 8,434	$ (63)	$ (167)	$ (230)	$ 8,267
7	$ 8,267	$ (62)	$ (168)	$ (230)	$ 8,099
8	$ 8,099	$ (61)	$ (169)	$ (230)	$ 7,929
9	$ 7,929	$ (59)	$ (171)	$ (230)	$ 7,759
10	$ 7,759	$ (58)	$ (172)	$ (230)	$ 7,587
11	$ 7,587	$ (57)	$ (173)	$ (230)	$ 7,413
12	$ 7,413	$ (56)	$ (175)	$ (230)	$ 7,239
13	$ 7,239	$ (54)	$ (176)	$ (230)	$ 7,063
14	$ 7,063	$ (53)	$ (177)	$ (230)	$ 6,886
15	$ 6,886	$ (52)	$ (179)	$ (230)	$ 6,707
16	$ 6,707	$ (50)	$ (180)	$ (230)	$ 6,527
17	$ 6,527	$ (49)	$ (181)	$ (230)	$ 6,346
18	$ 6,346	$ (48)	$ (183)	$ (230)	$ 6,163
19	$ 6,163	$ (46)	$ (184)	$ (230)	$ 5,979
20	$ 5,979	$ (45)	$ (185)	$ (230)	$ 5,794
21	$ 5,794	$ (43)	$ (187)	$ (230)	$ 5,607
22	$ 5,607	$ (42)	$ (188)	$ (230)	$ 5,419
23	$ 5,419	$ (41)	$ (190)	$ (230)	$ 5,230
24	$ 5,230	$ (39)	$ (191)	$ (230)	$ 5,039
25	$ 5,039	$ (38)	$ (192)	$ (230)	$ 4,846
26	$ 4,846	$ (36)	$ (194)	$ (230)	$ 4,652
27	$ 4,652	$ (35)	$ (195)	$ (230)	$ 4,457
28	$ 4,457	$ (33)	$ (197)	$ (230)	$ 4,260
29	$ 4,260	$ (32)	$ (198)	$ (230)	$ 4,062
30	$ 4,062	$ (30)	$ (200)	$ (230)	$ 3,862
31	$ 3,862	$ (29)	$ (201)	$ (230)	$ 3,661
32	$ 3,661	$ (27)	$ (203)	$ (230)	$ 3,458
33	$ 3,458	$ (26)	$ (204)	$ (230)	$ 3,254
34	$ 3,254	$ (24)	$ (206)	$ (230)	$ 3,048
35	$ 3,048	$ (23)	$ (207)	$ (230)	$ 2,841
36	$ 2,841	$ (21)	$ (209)	$ (230)	$ 2,632
37	$ 2,632	$ (20)	$ (210)	$ (230)	$ 2,422
38	$ 2,422	$ (18)	$ (212)	$ (230)	$ 2,210
39	$ 2,210	$ (17)	$ (214)	$ (230)	$ 1,996
40	$ 1,996	$ (15)	$ (215)	$ (230)	$ 1,781
41	$ 1,781	$ (13)	$ (217)	$ (230)	$ 1,564
42	$ 1,564	$ (12)	$ (218)	$ (230)	$ 1,346
43	$ 1,346	$ (10)	$ (220)	$ (230)	$ 1,125
44	$ 1,125	$ (8)	$ (222)	$ (230)	$ 904
45	$ 904	$ (7)	$ (223)	$ (230)	$ 680
46	$ 680	$ (5)	$ (225)	$ (230)	$ 455
47	$ 455	$ (3)	$ (227)	$ (230)	$ 228
48	$ 228	$ (2)	$ (228)	$ (230)	$ 0

	Interest Saved	$ (790)

For any query or clarification, please leave a comment.

jeff jeffy answered 8 months ago

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