Adam borrowed $1,200 for 18 months at 11.5% simple interest under
an add-on plan. What was his monthly payment?
a. $1,312.50
b. $138
c. $78.17
d. $150
First, we need to calculate the total amount of interest Adam will pay over the 18 months:
Interest = Principal x Rate x Time
Interest = $1,200 x 0.115 x 1.5 (18 months expressed in years)
Interest = $207
Next, we need to add the interest to the principal to find the total amount Adam will pay back:
Total amount = Principal + Interest
Total amount = $1,200 + $207
Total amount = $1,407
Finally, we can divide the total amount by the number of payments (18 months = 18 payments) to find Adam's monthly payment:
Monthly payment = Total amount / Number of payments
Monthly payment = $1,407 / 18
Monthly payment = $78.17
Therefore, the answer is c. $78.17.