benson has a bankruptcy on his credit report, so he pays higher interest rates on his current loans. he…
benson has a bankruptcy on his credit report, so he pays higher interest rates on his current loans. he calculates that the extra money he pays in additional interest each year, if invested at the rate of 2% for one year, could earn him simple interest totaling $180. how much does benson pay in additional interest each month?\na. $360\nb. $750\nc. $900\nd. $1,000\nplease select the best answer from the choices provided.
Answer
Explanation:
Step1: Recall simple - interest formula
The simple - interest formula is $I = Prt$, where $I$ is the interest, $P$ is the principal amount, $r$ is the annual interest rate, and $t$ is the time in years. Given $I = 180$, $r=0.02$ (since $2%=0.02$), and $t = 1$. We need to find $P$.
Step2: Solve for the principal amount $P$
From $I = Prt$, we can solve for $P$ by rearranging the formula: $P=\frac{I}{rt}$. Substituting the given values: $P=\frac{180}{0.02\times1}=\frac{180}{0.02}=9000$. This $P$ is the extra money he pays in additional interest each year.
Step3: Calculate the monthly additional interest
To find the monthly additional interest, divide the annual additional interest by 12. So, the monthly amount is $\frac{9000}{12}=750$.
Answer:
B. $750$