Rule of 78s. Miguel Perez of Pamona, California, obtained a two-year installment loan for $1,500 to buy a television set eight months ago. The loan had a 12.6 percent APR and a finance charge of $204.72. His monthly payment is $71.03. Miguel has made eight monthly payments and now wants to pay off the remainder of the loan. The lender will use the rule of 78s method to calculate a prepayment penalty.

(a) How much will Miguel need to give the lender to pay off the loan?

(b) What is the dollar amount of the prepayment penalty on this loan?

AppendixLO1