10. Comparing payments on Installment loans when using the simple-Interestor add-on methods to compute finance charges Comparing Loan Payments Using the Simple-Interest and Add-On Mathods of Interest Computation Installment loans allow borrowers to repay the loan with periodic payments over time. They are more common than single-payment loans because it is easier for most people to pay a fixed amount periodically (usually monthly) than budget for paying ane big amount in the future. Interest on Instalment loans may be computed using the simple interest method or the add-on method For an installment loan using wimple interest and equal payments throughout the life of the foon, interest is charged only on the outstanding balance. As each payment is made, more of it is allocated to reducing the principal. As the principal owed decreases, so too does the interest charged on it. Since the payment is always the same each month, the allocation between principal and interest is always different (more to the principal and Sess to the interest) The add-on method is a widely used technique for computing interest on instaliment loans with the add-on method, interest is calculated by applying the stated interest rate to the original balance of the loan Nick and Tim are taking out installment loans for $1,500 ot a stated interest rate of 5% The term of each toan is six years. Monthly Installment Loan Payments to Repay a $1,000, Simple Interest Loan Number of Monthly Payments Rate of Interest 12 24 36 48 50 72 34 585.61 $43.87 $29.97 523.03 $18.8% $16.10 $14.13 6 586.07 $44.32 $30.42 $23.49 $19.33 $16.57 $14.61 2 586.53 $14.27 $30.88 $23.95 $19.80 517.05 $15.09 B $86.99 $45.23 $31.34 $24.41 $20.28 $17.53 $15.59 CA245 LASER st DA 6207 CA no Answer the following questions using the preceding repayment information table as necessary, Tim Nick Nick's loan is simple interest to compute finance charges. Nick's monthly payment rounded to the nearest cent is $ Tim's foon uses the add-on method to compute finance charges Tim's total finance charge rounded to the nearest centis Complete the following tables using an interim ligures rounded to the nearest cont in your calculations. Enter all figures as positive numbers rounded to the nearest cont. (Note: The tables are slightly different to reflect the different methods used for finance charges.) Tim - Add-On $ 5 Nick - Simple Total payments Principal Finance charge $ Principal Finance charge Total payments 5 who paid more for the same loan? Nick, whose loan used the add-on method to compute finance charges Tim, whose loonused the simple interest method to compute finance charges Tim, whose foon used the add-on method to compute finance charges Nick, whose loan used the simple interest method to computer finance charges