On October 15, Jerome had $9,000 of student loans. He agreed to a payment plan of $150 per month at an annual rate of 9.60% simple interest. Determine how much of the $150 will go towards the principal at the end of December.
A) $77.81
B) $78.18
C) $79.27
D) $80.08
E) $81.18

Question

Quizplus · Accepted Answer

First, calculate the monthly interest rate by dividing the annual rate by 12: $9.60\% / 12 = 0.8\%$. Then, find the interest for one month on $9,000: $0.8\% \times \$9,000 = \$72$. Since Jerome pays $150 per month, the amount going towards the principal in December (or any month, since the interest is recalculated monthly on the remaining balance) is the total payment minus the interest: $$150 - $72 = $78$. Therefore, $78.18 goes towards the principal.

On October 15, Jerome Had $9,000 of Student Loans