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For Exercises
Kevin and Roxanne Gahagan did not have sufficient cash to pay their income taxes. However, they had previously set up a line of credit with their bank. On April 15, they wrote a check to the Internal Revenue Service on their line of credit for $6, 243. The line's interest rate is 5.75%.
a. Find the size of the required monthly interest payment.
b. The Gahagans decided that it would be in their best interests to get this loan paid off in eight months. Find the size of the monthly principal-plus-interest payment that would accomplish this. HINT In effect, the Gahagans are converting the loan to an amortized loan.
c. Prepare an amortization schedule for all eight months of the loan.
d. Find the amount of line of credit interest that the Gahagans could deduct from their taxes next year.
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Chapter 5 Solutions
EBK MATHEMATICS: A PRACTICAL ODYSSEY
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