On October 15, Jerome had $9,000 of student loans. He agreed to a payment plan of $150 per month at an annual rate of 9.60%. Determine how much of the $150 will go towards the principal at the end of December.
A) $77.81
B) $78.18
C) $79.27
D) $80.08
E) $81.18

Question

Quizplus · Accepted Answer

First, we need to find the monthly interest rate by dividing the annual interest rate by 12:

9.60% / 12 = 0.008

In the first month, the interest charged will be:

$9,000 x 0.008 = $72

So, the amount of the payment that will go towards the principal will be:

$150 - $72 = $78

For the second month, the amount of the loan that remains unpaid will be:

$9,000 - $78= $8,922

The interest charged on this amount will be:

$8,922 x 0.008 = $71.38

So, the amount of the second payment that will go towards the principal will be:

$150 - $71.38 = $78.62

Since we are only interested in the amount that goes towards the principal at the end of December, we only need to calculate the second payment:

$78.62 is closest to answer option B, $78.18.

On October 15, Jerome Had $9,000 of Student Loans