Question

Genevieve is making monthly payments of $132.00 to pay off a loan that she took out to buy a security system, but she wants to pay off her loan faster. Which of these monthly payments will allow her to do so? A. $116.00 B. $108.00 C. $124.00. D. 140.00

Answer 1

paying more monthly will allow it to be paid off faster.
D is the correct answer

Answer 2

D. $ 140.00

Explanation:

Since, the monthly payment of a loan is,

`P=((r)/(12)(P.V.))/(1-(1+(r)/(12))^(12t))`

Where, P.V. is the principal amount of the loan,

r is the annual rate,

t is the number of years,

By the above formula,

It is clear that with decreasing the number of year the amount of monthly payment will be increased,

⇒ Time is inversely proportional to the amount of monthly payment,

Thus, if we want to pay off the loan fast then we must increase the amount of the monthly payment.

The given monthly payment = $ 132,

Hence, the monthly payment must be more than $ 132,

⇒ Option D would be correct.