Question

the following table shows a portion of a three-year amortization schedule.
3 year amortization schedule
loan amount or principal: $ 11,940.00
interest rate on loan: 7.45%
extra payment to principal: $

month | payment | principal | interest | balance
17 | $ 371.13 | $ 327.92 | $ 43.21 | $ 6,632.16
18 | $ 371.13 | $ 329.96 | $ 41.17 | $ 6,302.20
19 | $ 371.13 | $ 332.01 | $ 39.13 | $ 5,970.19
20 | $ 371.13 | $ 334.07 | $ 37.06 | $ 5,636.12
21 | $ 371.13 | $ 336.14 | $ 34.99 | $ 5,299.98
22 | $ 371.13 | $ 338.23 | $ 32.90 | $ 4,961.75
23 | $ 371.13 | $ 340.33 | $ 30.80 | $ 4,621.42
24 | $ 371.13 | $ 342.44 | $ 28.69 | $ 4,278.98
25 | $ 371.13 | $ 344.57 | $ 26.57 | $ 3,934.41

after two years, how much has been paid into interest?
a. $4,628.14
b. $1,246.10
c. $978.96
d. $1,912.05

Explanation:

Identify the given parameters

We are given a 3-year amortization schedule with:

• Loan Amount (Principal): \(P = \$11,940.00\)
• Monthly Payment: \(PMT = \$371.13\)
• Balance after 24 months (2 years): \(B_{24} = \$4,278.98\) (from Table Reading)

Calculate total amount paid in 2 years

Using the Amortization Schedule concept:
The total amount paid over 24 months is:

$$ \text{Total Paid} = 24 \times \$371.13 = \$8,907.12 $$

Calculate principal paid in 2 years

The principal paid is the difference between the initial loan amount and the balance after 24 months:

$$ \text{Principal Paid} = \$11,940.00 - \$4,278.98 = \$7,661.02 $$

Calculate total interest paid in 2 years

The total interest paid is the total amount paid minus the principal paid:

$$ \text{Interest Paid} = \$8,907.12 - \$7,661.02 = \$1,246.10 $$

Answer:

• a. $4,628.14
• b. $1,246.10 (Correct answer)
• c. $978.96
• d. $1,912.05