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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?

Respuesta :

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

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%.

[tex]I=Prt[/tex], 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:

[tex]7\%=\frac{7}{100}=0.07[/tex]

1 month = 1/12 year

[tex]I=\$115,000\times 0.07\times \frac{1}{12}[/tex]

[tex]I=\$9583.333\times 0.07[/tex]

[tex]I=\$670.833\approx \$671[/tex]

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

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