Results 1 to 2 of 2

Math Help - Unearned Interest Actuarial and Rule of 78

  1. #1
    Newbie
    Joined
    Oct 2008
    Posts
    21

    Unearned Interest Actuarial and Rule of 78

    I keep getting the answer $107.79 for the Actuarial method. In the book it says $41.29 for actuarial and $39.70 for the rule of 78 method. Could someone please explain what I am doing wrong?

    The problem states each loan was paid off early and to find the unearned interest.Here is the problem.

    Amount financed is $3310, regular monthly payments are 201.85, with 18 payments scheduled. There are 6 remaining payments scheduled after payoff. I think the last part is what is tripping me.
    Follow Math Help Forum on Facebook and Google+

  2. #2
    MHF Contributor
    Joined
    Aug 2007
    From
    USA
    Posts
    3,111
    Thanks
    2
    Total Paid: $3,633.30
    Total Interest Paid: $323.30

    Rule of 78's

    This is kind of a misnomer, since there are 18 payments. 1+2+3+...+18 = 171

    Thus, the magic number is $323.30 / 171 = $1.89

    Does that get you anywhere? You weren't dividing by 78, were you?

    "Unearned Interest" is that interest that would have been paid, had the loan lived to original maturity. This is trivial for the Rule of 78's...

    $1.89*(1+2+3+4+5+6) = $1.89(21) = 39.69 -- Okay, a little rounding problem.

    It's a little trickier for the Actuarial. Let's see what you get.
    Follow Math Help Forum on Facebook and Google+

Similar Math Help Forum Discussions

  1. actuarial exam question
    Posted in the Advanced Statistics Forum
    Replies: 3
    Last Post: October 7th 2011, 11:01 PM
  2. Derivative (Chain Rule/Interest rate)
    Posted in the Calculus Forum
    Replies: 1
    Last Post: June 16th 2009, 11:13 PM
  3. actuarial mathematics
    Posted in the Advanced Applied Math Forum
    Replies: 0
    Last Post: May 26th 2009, 11:51 PM
  4. Actuarial PV
    Posted in the Business Math Forum
    Replies: 1
    Last Post: May 3rd 2009, 07:17 PM

Search Tags


/mathhelpforum @mathhelpforum