Your brother, a banker, has just approved a loan for you, an add-on interest loan. You will borrow $2,000 for one year with a 12% annual interest rate. What is your monthly payment?

Question

Quizplus · Accepted Answer

To calculate the monthly payment for an add-on interest loan, you first need to calculate the total amount of interest you will pay over the term of the loan. For this loan, the interest is 12% of $2,000, which is $240.

Next, add the interest to the original loan amount to get the total amount you will repay: 
$2,000 + $240 = $2,240

Finally, divide the total amount by the number of payments you will make to find the monthly payment. For this loan, you will make 12 payments (one each month for a year), so: 
$2,240 ÷ 12 = $186.67

Therefore, the answer is B: $186.67.

Your Brother, a Banker, Has Just Approved a Loan for You