A college student receives an interest-free loan of $8,250 from a relative. The student will repay $125 per month until the loan is paid off. After how many months will the student owe $5,000?
A)after 2.6 months.
B)after 26 months.
C)after 40 months.
D)after 28 months.
E)after 23 months.

Question

Quizplus · Accepted Answer

To determine after how many months the student will owe $5,000, we calculate the difference between the initial loan amount and the remaining amount, then divide by the monthly payment. The initial loan is $8,250, and the student wants to reduce it to $5,000, which is a difference of $3,250 ($8,250 - $5,000). Dividing this difference by the monthly payment of $125 gives $3,250 / $125 = 26 months.

A College Student Receives an Interest-Free Loan of $8,250 from a Relative