Consider a $25,000, 5 - year auto loan with a fi xed interest rate of 7.6%.

(a) After which monthly payment does the worst case rule of 78 prepayment penalty occur and how much is this penalty?

(b) If you haven ’ t made the monthly payment yet, using your answers from problem 1a, how much would it cost you to pay off this loan?

(c) Again using your answer from problem 1a, what is the payoff penalty as a function of the unpaid balance, both before and after you ’ ve made the regular twenty - fi rst payment?

(d) Again using your answer from problem 1a, what is the penalty based on 3 months ’

interest on the remaining balance (after the monthly payment is made)? How does this compare to the rule of 78 penalty?