Question 1202219: A loan payment of $1000 was due 60 days ago and another payment of $1200 is due in 30 days. What single payment 90 days from now is required to pay off the two obligations If interest is to be 12% and the agreed focal date is 90 days from now ?
Answer by Theo(13342)   (Show Source):
You can put this solution on YOUR website! 1000 payment of loan was due 60 days ago.
1200 payment of loan is due in 30 days.
what single payment is required to pay off both loans in 90 days?
interest rate is 12% per year.
this appears to be a simple, add on interest, type loan.
it also appears that the original payments had the interest included as part of the payments on that loan.
this means that, 1000 was required to pay off the original loan 60 days ago, and 1200 was required to pay off the second loan 30 days from now.
90 days from now is required to pay off both loan payments.
since 1000 payment was due 60 days ago, then the additional interest on that payment is for 60 + 90 = 150 days.
the additional interest would be equal to 1000 * .12/365 * 150 = 49.31506849.
since 1200 payment is due in 30 days, then the additional interest on that payment is for 90 - 30 = 60 days.
the additional interest would be equal to 1200 * .12/365 * 60 = 23.67123288.
the total required (additional interest plus payments) to be paid in 90 days would be equal to 1000 + 1200 + 49.32 + 23.67 = 2272.99.
the formula for simple interest is i = p * r * n.
i is the interest
p is the principal.
r is the interest rate per time period.
n is the number of time periods.
in his problem, the payment required to pay off the original loan becomes the principal for the new loan due in 90 days.
the 1000 loan had an additional 60 days tacked on to it because the loan was due 60 days ago.
the 1200 loan had 30 days removed from it because the loan was due in 30 days from now.
let me know if you have any questions.
theo
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