Mathematics
Mathematics, 04.03.2020 02:51, farihasy6508

Consider a three-year loan (so we'll assume the numbers 1 through 36) for $5,000 with interest at 10% per year. Using standard amortization, the monthly payment is $161.33. In this example, we will not worry about exact or ordinary interest because the total interest to be paid is $808.13.
After the fifth month, the borrower decides to prepay the whole loan. Under a standard amortization plan the borrower would have paid $198.28 in cumulative interest. However, using the Rule of 78 a lender would calculate the fraction of the total interest based on two series:

{(n+35)+(n+34)+(n+33)+(n+32)+(n+31) }

{(n)+(n+1)+...+(n+35)}

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Consider a three-year loan (so we'll assume the numbers 1 through 36) for $5,000 with interest at 10...

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