Ed borrowed $1,500 for four months at 13.5%. How much did he have to
pay back under an add-on plan?
a. $1,550.63
b. $1,567.50
c. $67.50
d. $2,310
Under an add-on plan, the interest is added to the original amount borrowed and divided equally over the payment period. Therefore, the total amount Ed would have to pay back is:
$1,500 + ($1,500 x 0.135) = $1,767.50
Dividing this by 4 (the number of months in the payment period) gives:
$1,767.50 / 4 = $441.88 per month
So, over four months, Ed would need to pay back:
$441.88 x 4 = $1,767.50
Therefore, the correct answer is b. $1,567.50.