Question

If a borrower obtains an interest-only loan of $112,500 at an annual interest rate of 6%, what is the monthly interest payment (rounded to the nearest $1)? $550 $563 $648 $675

Answer 1

$563

First you will need to find the annual interest amount. To do this you will need to find 6% of 112,500.

6% can be written in decimal form as .06, so we can multiply .06 to 112,500 to find the annual interest rate.

.06 • 112,500=6,750

6,750 is the annual interest amount.

The next part of the question asks the monthly interest rate. You know there are 12 months in a year so you can divide the annual interest amount by 12.

6,750÷12=562.5

$562.5 is the monthly interest payment and rounded to the nearest dollar would be

Choice 2: $563