jch103020 wrote:

Bunuel wrote:

A loan has a variable interest rate that fluctuates between 5% and 9% of the base payment per month. If base payments remain at $250 each month and an additional monthly surcharge of 1% is added to the combined (base + interest), what would be the greatest possible payment due in any given month?

A. $262.50

B. $265.13

C. $272.50

D. $275.23

E. $286.13

Can someone explain this one to me using a different method or point out the error in my thinking?

Use max value of 9% interest to calculate base and then add 1% interest to that value

Base payment + Base interest + Additional interest = Total

250 + .09(250) + (.01(.09(250)) =250 + 22.5 + .225 = 272.725

jch103020 , easy mistake.

The "additional interest" does not work because you are charging 1% on

interest only:

(.09)(250) = $22.50, and

($22.50 *.01) = $0.225

The extra 1% should be charged on

base + interest: 1.09(250) = $272.50

So either

Base payment + Base interest + Additional interest (

1% on base payment PLUS base interest) = Total

250 + .09(250) + (.01*

(1.09*(250)) = (250 + 22.5 + 2.725) = $275.225

OR

Add your first two terms:

$250 + $22.50 = $272.50

1% on that amount: (.01)($272.5) = $2.725

Add that amount to your "running total":

($250 + $22.50 + $2.725) = $275.225

If you think about multiplying decimals, it makes sense. (.01*.09) = .0009. You've charged 9/100th of a percent (.09%) on $250

Hope that helps.

_________________

In the depths of winter, I finally learned

that within me there lay an invincible summer.

-- Albert Camus, "Return to Tipasa"