From the answers given, tne interest rates are not APRs (although, when I calculated the answers on the assumption that they were APRs, the options ended up in the same order). I think these answers are calculated on the basis of the amount outstanding reducing each month, so the interest chargeable also reduces each month. If I had to, I would put the figures into a spreadsheet to check this, but it's not the sort of thing that I can do as mental arithmetic.
Thanks! This is the answer I was looking for as couldn't figure out how they got the figures (although I worked out correctly which is the best one). I managed to confirm your theory by finding a Loan repayment calculator by The Guardian which worked out that the total interest on Loan 5 is 3.83% which clarifies it (£100 + 3.83% = £103.83 + £3 charge = £106.83) although looks like they rounded it down ever so slightly unless the calculator is slightly off.
For those who are struggling to work out how the figures for loans 3-5 are calculated in the above post by ajmoney, putting the figures into a loan calculator website such as the one on MSE or Moneyfacts might help. So with a loan of £100 at an interest rate of 5% repayable over 12 months, the total amount repayable will be £102.67. Add the £10 arrangement fee detailed in the question and you get £112.67 (which is near enough to the £112.70 answer given in the question). The other loans can be explained the same way.
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I managed to confirm your theory by finding a Loan repayment calculator by The Guardian which worked out that the total interest on Loan 5 is 3.83% which clarifies it (£100 + 3.83% = £103.83 + £3 charge = £106.83) although looks like they rounded it down ever so slightly unless the calculator is slightly off.
Wishing all the students the very best.
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