FinancingQuestion 83 of 120
A borrower has a $240,000 interest-only loan at 6% annual interest. The monthly interest payment is:
a.$1,000
b.$1,100
c.$1,200
d.$1,440
Explanation
Annual interest equals $240,000 times 0.06, which is $14,400, and dividing by 12 gives a monthly interest payment of $1,200. On an interest-only loan the principal balance does not change with these payments. Interest is calculated on the outstanding balance.
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