Chapter 10, Problem 10CR

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8th Edition

Robert Brechner + 1 other

ISBN: 9781305585447

Textbook Problem

The U.S. rule states that when a partial payment is made on a loan, the payment is first used to pay off the accumulated ________ to date and the balance is used to reduce the _________. (10-9)

To determine

**To fill:** The blanks given in the statement “The U.S. rule states that when a partial payment is made on a loan, the payment is first used to pay off the accumulated to date and the balance is used to reduce the___________.”

Explanation

Interest refers to the amount paid by the borrower of the funds to the lender. Interest is paid by the borrower regularly over the period of time above the principal repayment. In this, a person uses another personâ€™s money in its business and pay interest on the same amount.

The formula to compute the interest is

Consider an example:

The principal amount of loan is

Compute the interest by substituting

Hence, the amount of interest is

Principal refers to the amount that is borrowed by the borrower.

Consider an example:

The rate of interest is

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