Find the amount of interest and the monthly payment for the loan described below. Round interest to the nearest dollar and monthly payment to the nearest cent. A $1,000 loan at 11% add-on rate for 3 years.
A) $\$ 330$ interest; $\$ 110.83$ per month
B) $\$ 330$ interest; $\$ 37.99$ per month
C) $\$ 368$ interest; $\$ 37.99$ per month
D) $\$ 330$ interest; $\$ 36.94$ per month
E) $\$ 368$ interest; $\$ 36.94$ per month

Question

Quizplus · Accepted Answer

To find the interest, we first need to calculate the total amount being borrowed. Since it is a 11% add-on rate, we can simply add the 11% to the principal amount to get the total amount:
Total amount = Principal amount + (11% of Principal amount)
Total amount = $1,000 + ($1,000 x 11%)
Total amount = $1,000 + $110
Total amount = $1,110

Next, we need to find the total amount being paid back over 3 years. To do this, we need to multiply the monthly payment by the number of months in 3 years (36 months):
Total amount paid back = Monthly payment x Number of months
Total amount paid back = $36.94 x 36
Total amount paid back = $1,328.64

Now, we can find the interest by subtracting the total amount borrowed from the total amount paid back:
Interest = Total amount paid back - Total amount borrowed
Interest = $1,328.64 - $1,000
Interest = $328.64

Rounding the interest to the nearest dollar gives us $330, which is the closest choice to our calculation. The monthly payment rounded to the nearest cent is $36.94, which matches choice D. Therefore, the best choice is D.

Find the Amount of Interest and the Monthly Payment for the Loan