Interest on a twelve-month installment loan is to be calculated using the add-on method.If the purchased to be financed is $1,000 and the add-on rate is 6%,then your monthly payment is about

Question

Quizplus · Accepted Answer

To calculate the monthly payment using the add-on method, we must simply add the interest to the principal and divide by the number of months in the loan term.

The interest on a $1,000 loan at 6% add-on rate is $60 ($1,000 x 0.06).

Adding this interest to the principal gives us $1,060, which must be paid over 12 months.

Dividing $1,060 by 12 gives us a monthly payment of $88.33, which is the closest match to option C.

Interest on a Twelve-Month Installment Loan Is to Be Calculated