Eric borrowed $1,800 for 9 months at 13.5% simple interest under an add-on plan. what was his monthly payment? a. $15.63 b. $220.25 c. $187.50 d. $1,982.25 answer is not c

The only sensible answer (from a test-taking point of view) is selection B.

You know the monthly repayment of $1800 over 9 months will be at least $200 per month. Since the interest is about 10% of the loan amount (3/4 of 13.5%), the amount added on for interest will be on the order of $20 per month.

If you work out the math, you find the payment is exactly $220.25 (selection B). You don't need to do that to make a sensible choice.


Payment = ($1800 + 9/12*0.135*1800)/9 = $220.25.

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