Answer:
The answer is: D) $144.90
Explanation:
If Maria pays monthly repayments of only interest, she will pay:
interest = P x R X T
Where: P = $6,925 ; R = 0.05/12 = 0.004167 ; T = 1 month
interest = $6,925 x 0.004167 x 1 = $28.85
If she pays only interest during 4 years, she will pay: 48 x $28.85 = $1,384.80
If Maria doesn't want to make any monthly payments, then she will owe:
total debt = P x (1 + R) x N
Where: P = $6,925 ; R = 5% / 12 = 0.004167 ; N = 48
total debt = $6,925 x 1.004167⁴⁸ = $8,454.70
to calculate only the interest owed:
$8,454.70 - $6,925 = $1,529.70
So if Maria decides to make monthly payments of only interest she can save:
$1,529.70 - $1,384.80 = $144.90
