Question

Javier took out a loan for $2700 at 12% interest, compounded annually. If he

makes yearly payments of $320, will he ever pay off the loan?
OA. No, because $320 is greater than the amount of interest he is
charged per year
OB. No, because $320 is less than the amount of interest he is
charged per year
OC. Yes, because $320 is less than the amount of interest he is
charged per year
OD. Yes, because $320 is greater than the amount of interest he is
charged per year

Answer 1

To determine if Javier will ever pay off the loan, calculate the total amount he will owe and see if the yearly payments cover that amount. Since the yearly payment is less than the annual interest amount, the loan balance will never be fully paid off.

Step-by-step explanation:

To determine if Javier will ever pay off the loan, we need to calculate the total amount he will owe and see if the yearly payments cover that amount.

1. First, calculate the interest amount for each year by multiplying the loan amount by the interest rate: $2700 * 0.12 = $324.
2. Next, subtract the interest amount from the yearly payment: $320 - $324 = -$4. Since the yearly payment is less than the interest amount, the loan balance will never be fully paid off.

Therefore, the answer is No, because $320 is less than the amount of interest he is charged per year.