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pay off the entire loan

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pay off the entire loan

by sanju09 » Wed Feb 29, 2012 12:14 am
Brian took a loan of $4000 from his friend at a simple interest of 6% per year. If he has to pay off the entire loan amount and the interest in equal installments within 8 months, how much would he have to pay every month?
A. $480
B. $500
C. $520
D. $660
E. $740
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by Anurag@Gurome » Wed Feb 29, 2012 1:01 am
sanju09 wrote:Brian took a loan of $4000 from his friend at a simple interest of 6% per year. If he has to pay off the entire loan amount and the interest in equal installments within 8 months, how much would he have to pay every month?
A. $480
B. $500
C. $520
D. $660
E. $740
Simple Interest = P * R * T, where
P = principal amount
R = rate of interest
T = time in years
Here, interest = 4000 * 6% * 8/12 = 4000 * 0.06 * 8/12 = 60 * 8/3 = $160

Therefore, every month Brian will have to pay ($4000 + $160)/8 = $4160/8 = [spoiler]$520[/spoiler]

The correct answer is C.
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