Marty took a $5000 loan from a financial institute at a rate of 6%, which should be repaid in two equal installments of $2575.25 made every 4 months. How much more interest would have been paid, had Marty paid it in a single installment after 8 months?
A) $75.25
B) $150.50
C) $200
D) $49.50
E) $0

Question

Quizplus · Accepted Answer

First, we can find the total interest Marty would pay if he repaid the loan with equal installments:

Each installment is $2575.25, so he would pay a total of $5150.50.
The loan amount is $5000, so the interest paid would be $150.50 ($5150.50 - $5000).

Next, we can find the interest Marty would pay if he repaid the loan in a single installment after 8 months:

The loan has a 6% annual interest rate, so the monthly interest rate is 6%/12 = 0.5%.
After 8 months, the total interest accrued would be:
$5000 x 0.5% x 8 = $20
So, in total, Marty would have to repay $5020.

The difference in interest paid between the two options is:
$150.50 - $20 = $130.50

Therefore, the answer is not A, B, C or E. The correct answer is D: $49.50 more interest would have been paid if Marty paid it in a single installment after 8 months.

Marty Took a $5000 Loan from a Financial Institute at a Rate