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
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.
