Ada had $12,500 in student loans. On Sept 3, she began repayments of $450 per month when interest rates were 9.2% annually. On October 8 the interest rates rose to 9.5%. By what amount will the principal be reduced given the $450 payment on October 31?
A) $361.42
B) $355.18
C) $352.09
D) $350.01
E) $347.78

Question

Quizplus · Accepted Answer

The interest for October is calculated using the new rate of 9.5% annually, which is approximately 0.79% monthly. The interest for October is $12,500 * 0.0079 = $98.75. Subtracting this from the $450 payment, the principal is reduced by $450 - $98.75 = $351.25, which is closest to option C, $352.09.

Ada Had $12,500 in Student Loans