Question

Tyrell has a bankruptcy on his credit report and therefore 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 2.5% for one year, could earn him simple interest totaling $300. How much does Tyrell pay in additional interest each month?
a.
$90
b.
$100
c.
$1,000
d.
$12,000

Answer 1

Let the extra interest per year be x. Simple interest for one year at 2.5% is 0.025x = 300, so x = 300/0.025 = 12,000 per year. Per month that’s 12,000/12 = $1,000.

Answer: c. $1,000