On September 12, Claire had $8,000 in student loans outstanding. She agreed to $125 per month payments to repay these loans. From September 12 to October 8, the simple interest rates were 5.0%, but decreased to 4.5% thereafter. Calculate the balance outstanding on October 31.
A) $7,800.76
B) $7,808.96
C) $7,819.27
D) $7,826.34
E) $7,855.68

Question

Quizplus · Accepted Answer

The correct answer is A because the balance outstanding on October 31 is $7,800.76. This is calculated by taking the original loan amount of $8,000 and subtracting the total amount of payments made from September 12 to October 31. The total amount of payments made is $375 (3 x $125). The interest accrued from September 12 to October 8 is $33.33 (8,000 x 5.0% x 26/365). The interest accrued from October 9 to October 31 is $17.42 (8,000 x 4.5% x 22/365). The total interest accrued is $50.75. The balance outstanding on October 31 is $8,000 - $375 + $50.75 = $7,800.76.

On September 12, Claire Had $8,000 in Student Loans Outstanding