Question

Sharon will borrow $3400 at 11% APR. She will pay it back over 18 months. What will her monthly payment be?

$512.42

$225.72

$681.50

$220.06

Answer 1

The answer is 220.06

Answer 2

The first step to calculate the APR is to calculate the interest rate per $100

Here Interest rate = 11%

Term or time of repayment = 18 months

interest per $100 =

$100 × 11% × $\frac{18}{12}$

= $16.50

Now we should calculate the interest part for $3400 for 18 months

$\frac{3400}{100}$ × $\frac{16.50}{18}$

= $31.12

So $ 31.17 is the interest part of the repayment amount

Now lets calculate the principal part which would be $ 3400 divided equally for 18 months

$\frac{3400}{18} = 188.89$

Now to find the final payment we add the interest and the principal part

$31.17+$188.89 = $220.06

Hence option D is the right answer