Ada had $12,500 in student loans. On Sept 3, she began repayments of $450 per month when simple interest rates were 9.2% annually. On October 8 the interest rates rose to 9.5%. By what amount will the principal be reduced given the $450 payment on October 31?
A) $361.42
B) $355.18
C) $352.09
D) $350.01
E) $347.78

Question

Quizplus · Accepted Answer

The correct answer is C.The interest for the first month is $12,500 * 9.2% / 12 = $92.The principal reduction is $450 - $92 = $358.The interest for the second month is $12,142 * 9.5% / 12 = $91.18.The principal reduction is $450 - $91.18 = $358.82.The total principal reduction is $358 + $358.82 = $716.82.The principal reduction given the $450 payment on October 31 is $716.82 / 2 = $358.41.

Ada Had $12,500 in Student Loans