When a loan scheduled to run n payments is paid off k paymen

When a loan scheduled to run n payments is paid off k payments ahead of schedule, the amount of unearned interest u is given by u = f middot k(k + 1)/n(n + 1), where f is the total scheduled finance charge. The finance charge on a loan taken out by Ivan is $642. If there were 18 equal monthly installments needed to repay the loan, and the loan is paid in full with 4 months remaining, find the amount of unearned interest. (Round your answer to the nearest cent.) $394.21 $37.54 $381.84 $25.18

Solution

u = f.(k(k+1))/n(n+1)

f = $642 ; n = 18 ; k = 4

find u :

u = 642*4*5/18*19 = $ 37.54