Question

Arnold borrowed $7890 at 11.5 percent for five years. How much did Arnold Pay in interest?

A.$2,199
B.$2,300
C.$1,150
D.$2.520

Answer 1

Option D. $2520 is correct

Explanation:

Principal value = $7890

Rate of interest = 11.5 annually

`\text{Monthly Rate of Interest = }(11.5)/(12)=0.96\%=0.0096`

Time = 5 years

⇒ n = 60 months

`\text{Monthly Payment = }\frac{rate* \text{Principal value}}{1-(1+r)^(-n)}\\\\\text{Monthly payment = }(0.0096* 7890)/(1-(1+0.0096)^(-60)) \\\\\implies\text{Monthly Payment = }\$173.50`

Total payment made by Arnold = No. of months × Monthly Payment

⇒ Total Payment = 60 × 173.50

⇒ Total Payment = $10410

Money borrowed = $7890

Hence, Amount of interest = Total payment - Amount borrowed

⇒ Interest = 10410 - 7890

⇒ Interest = $2520

Therefore, Option D. $2520 is correct