she pays 125 per month.
at the end of each year, she pays 5% on the remaining balance, after she has made all the payments for that year.
125 per month * 12 = 1500 per year.
at the end of the first year, the remaining balance is equal to 5000 - 1500 = 3500.
5% interest added to that makes it equal to 3675.
at the end of the second year, the remaining balance is 3675 - 1500 = 2175.
5% interest added to that makes it equal to 2283.75
at the end of the third year, the remaining balance is 2283.75 - 1500 = 783.75.
5% interest added to that makes it equal to 822.9375
it will take her another 7 months to finish paying off at 125 per month.
therefore, it will take her 3 years and 7 months to pay off the loan.
there will be 6 months with payments of 125 per month for a total of 750.
the balance remaining of 822.9375 - 750 = 72.9375 will be paid by the end of the 7th month.
interest in the last year of payment will not be charged since there will be no remaining balance after the third year.
