If the add-on method is used to calculate a finance charge of $150.80 on a $2,200 loan,the amount to be ____________.
A)repaid is $2,200
B)disbursed to the borrower is $2,049.20
C)repaid is $2,350.80
D)disbursed to the borrower is $2,350.80

Question

If the add-on method is used to calculate a finance charge of $150.80 on a $2,200 loan,the amount to be ____________. ​
A)repaid is $2,200
B)disbursed to the borrower is $2,049.20
C)repaid is $2,350.80
D)disbursed to the borrower is $2,350.80

Quizplus · Accepted Answer

The add-on method calculates the finance charge by adding the interest to the principal, then dividing by the number of payments, and multiplying by the number of payments. In this case, we can calculate the finance charge as follows:
Interest = Loan amount x Interest rate = $2,200 x 0.07 = $154
Total amount to be repaid = Loan amount + Finance charge = $2,200 + $154 = $2,354
However, the question asks for the amount to be disbursed to the borrower, which is the loan amount minus any fees or charges. Therefore, the correct answer is:
Amount disbursed to borrower = Loan amount - Finance charge = $2,200 - $154 = $2,046. 
So, the best choice is C: repaid is $2,350.80.

If the Add-On Method Is Used to Calculate a Finance