Sondra Xiang from Santa Fe, New Mexico, has borrowed $3,000 for 12 months plus an additional finance charge of $480. She is scheduled to pay equal monthly installments of $290 ($3,480 / 12). Assume that Sondra wants to pay off the loan after only 4 months. Step 1: Each month of Sondra's loan is assigned a value (12 for the first month, 11 for the second month, 10 for the third month, and so on). Sondra has the loan for the first 4 months. Adding up the values for each of the first 4 months gives you the following number: . Step 2: According to the rule of 78s method, the lender assumes that a portion of the $480 add-on interest has already been paid. To determine how much interest that Sondra has already paid, divide your answer from step 1 (the sum of the values for each month that Sondra has the loan) by 78. Then multiply this ratio by the total amount of add-on interest ($480). (Note: Round your answer to the nearest cent.) Interest Paid = ( / 78) x $480 = $

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Step 1 The sum of the values for each month that Sondra has the loan can be calculated as foll... View the full answer