What is the monthly payment for a $24,000,four-year,12 percent loan with the interest calculated using the add-on method?

Question

Quizplus · Accepted Answer

To calculate the monthly payment using the add-on method, we need to add the interest to the principal amount, and then divide it by the number of months in the loan term.
The total interest charged over the four-year period is:
Interest = Principal x Rate x Time
= $24,000 x 0.12 x 4
= $11,520
The total amount to be repaid is:
Total amount = Principal + Interest
= $24,000 + $11,520
= $35,520
The monthly payment is:
Monthly payment = Total amount / Number of months
= $35,520 / (4 x 12)
= $740
Therefore, the best choice is C.

What Is the Monthly Payment for a $24,000,four-Year,12 Percent Loan