Question

Solve for the amount of monthly interest that is owed on an interest-only loan based on the following facts: Loan amount $115,000, annual interest rate of 7%? $575, $671, $767, or $7,475?

Answer 1

The amount of interest owed is $115,000×0.07/12 ≈ $671.

Answer 2

Answer:

$671.

Step-by-step explanation:

We are asked to find amount of monthly interest on a loan amount of $115,000 with an APR of 7%.

$I=Prt$, where,

I = Amount of interest,

P = Principal amount,

r = Annual interest rate in decimal form,

t = Time in years.

First of all, we need to convert our given rate in decimal form and time in years as:

$7\%=\frac{7}{100}=0.07$

1 month = 1/12 year

$I=\ 115,000\times 0.07\times \frac{1}{12}$

$I=\ 9583.333\times 0.07$

$I=\ 670.833\approx \ 671$

Therefore, the monthly interest is $671 and option B is the correct choice.