For Exercises 51 and 52, refer to the following. Some loans, for cars or leases, penalize early repayment by using the Rule of 78s (also known as the “sum of the digits rule") to calculate interest paid, because it loads the interest toward the early months of the loan.

Suppose you have an add-on loan for $1122 for 12 months with monthly payments of $100 and total interest for the year of $78. According to the Rule of 78s, 12/78 of the year’s interest, or $12, is considered as having been paid in the first month, $11 in the second, and so forth, up to $1 in the twelfth month. It is called the Rule of 78s because . So, if you pay off the remainder of the loan after just 6 months, you will have made payments totalling $600, of which is considered interest. So, according to the rule, you will have paid off only of the principal. Thus, you still owe . That is less than the $600 you would have paid in the succeeding 6 months—but you had the use of the money for only 6 months instead of the full year.