The discount method is a method for computing interest on an installment loan. With the discount method, you calculate the interest based on a discounted rate that is multiplied times the amount borrowed and by the number of years to repay the loan. The interest is then subtracted from the amount of the loan, and only the difference is given to the borrower. Thus, the interest is paid upfront. For loans using the discount method, the monthly payment amount is calculated based on the entire loan amount, including the discounted interest.

Consider the following example:

Jonas Frank from Sacramento, California, borrows $1,500 (including interest) for four years (48 months) at an interest rate of 7% per year. The loan uses the discounted method for determining the amount of interest.

How much of the loan amount ($1,500) consists of interest?

$

How much of the loan is actually given directly to Jonas?

$

What is the monthly payment, assuming 48 monthly payments?

$ (Do NOT round up or down.)