Question

Benson has a bankruptcy on his credit report, so he pays higher interest rates on his current loans. He calculates that the extra money he pays in additional interest each year, if invested at the rate of 2% for one year, could earn him simple interest totaling $180. How much does Benson pay in additional interest each month? a. $360 b. $750 c. $900 d. $1,000

Answer 1

The correct answer is letter b, $750

Explanation:

Answer 2

The formula for simple interest is given by


`I= (PRT)/(100)`

where P is the principal, R is the rate and T is the time.

Let the additional interest Benson pays each year be P, then


`(P*2*1)/(100) =180 \\ \\ \Rightarrow2P=180*100=18000 \\ \\ \Rightarrow (18000)/(2) =9000`

Therefore, the additional interest Benson pays each month is given by


`(9000)/(12) =\$750`