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?

Answer 1

Answer: $1000

Explanation:

From Tyrell's calculation, if he invests his additional credit card payment at the rate 2.5% per annum for one year could earn him simple interest totaling $300

Recall:

Simple interest = principal × rate × time

Principal = additional credit card payment

$300 = principal(P) × (2.5/100) × 1

$300 = P × 0.025 × 1

$300 / 0.025 = P

P = $12,000

Therefore, additional payment per year = $12,000

Monthly payment thus equals :

$12,000 / 12 = $1000