Harry borrowed $1,800 for two years at 13% a year under an
add-on plan. He repaid the loan, including interest, in 24 equal
payments. How much was each payment?
a. $22.50
b. $112.50
c. $225
d. $94.50
First, we need to calculate the total amount of interest Harry will pay over the two-year period:
Interest = Principal x Rate x Time
Interest = $1,800 x 0.13 x 2
Interest = $468
So the total amount Harry will repay, including the principal and interest, is:
Total amount = Principal + Interest
Total amount = $1,800 + $468
Total amount = $2,268
Since Harry will repay the loan in 24 equal payments, each payment will be:
Payment = Total amount / Number of payments
Payment = $2,268 / 24
Payment = $94.50
Therefore, the answer is (d) $94.50.