Jerre borrowed $1,750 for six months at 9.5% simple interest under an
add-on plan. What was his monthly payment?
a. $166.25
b. $83.13
c. $305.52
d. $1,883.13
The add-on plan means that the interest is calculated on the entire loan amount and added to the principal, which is then divided into equal monthly payments.
First, calculate the total amount of interest:
$1,750 x 9.5% = $166.25 per six months
Divide by six to get the monthly interest:
$166.25 / 6 = $27.71
Add the monthly interest to the principal:
$1,750 + ($27.71 x 6) = $1,947.26
Finally, divide the total by six to get the monthly payment:
$1,947.26 / 6 = $324.54
Therefore, the closest answer choice is c. $305.52.