On January 12, Alex has student loans totalling $14,000. Alex agreed to a $200 per month repayment schedule at which time the annual interest rate was 5.5% simple interest. Determine the balance of the loan at the end of January.
A) $13,840.08
B) $13,845.20
C) $13,881.91
D) $13,728.47
E) $13,990.64

Question

Quizplus · Accepted Answer

The correct answer is A because the balance of the loan at the end of January is $13,840.08. This is calculated by taking the original loan amount of $14,000 and subtracting the amount of interest that has accrued over the month of January. The interest for the month of January is calculated by taking the annual interest rate of 5.5% and dividing it by 12 to get the monthly interest rate of 0.4583%. This monthly interest rate is then multiplied by the original loan amount of $14,000 to get the amount of interest that has accrued over the month of January, which is $60.00. The balance of the loan at the end of January is then calculated by subtracting the amount of interest that has accrued over the month of January from the original loan amount, which gives us $13,840.08.

On January 12, Alex Has Student Loans Totalling $14,000