Answer:
$5541.47
Step-by-step explanation:
You want the amount of interest paid on a 7-year loan of $27,446 at 5.4% when payments are made biweekly.
Interest
We can find the interest using a formula that needs the principal amount P, the number of payments N, and the annual interest rate r. The number of payments is 26·7 = 182. For 26 payments per year, the formula is ...
[tex]I=P\left(\dfrac{N(r/26)}{1-(1+r/26)^{-N}}-1\right)\\\\\\I=27446\left(\dfrac{182(0.054/26)}{1-(1+0.054/26)^{-182}}-1\right)\approx5541.47[/tex]
Jack will pay about $5541.47 in interest on his loan.
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Additional comment
The attached calculator display shows the interest being computed by subtracting the principal amount of the loan from the sum of all payments. In an actual loan, the remaining balance is computed after every payment (interest is rounded), so the final amount will generally vary from this calculation by a small amount. These formulas assume calculations are not rounded until the final answer.
