Question

installment loan
principal $1,810
term length 3 ½ years
interest rate 12%
monthly payment $53
how much of the 31st payment will go to interest if there is an outstanding principal of $596?
interest on 31st payment = $?

Explanation:

Step1: Recall the simple interest formula for monthly interest

The monthly interest rate \( r \) is the annual interest rate divided by 12. The annual interest rate is 12% or 0.12, so the monthly rate \( r=\frac{0.12}{12}= 0.01\).

Step2: Calculate the interest on the outstanding principal

The interest for a month is calculated as \( I = P\times r \), where \( P \) is the outstanding principal. Here, \( P = 596 \) and \( r=0.01 \). So \( I=596\times0.01 = 5.96 \).

Answer:

\( 5.96 \)