Question

A $400,000 loan has monthly interest-only payments of $2,600. What is the annual interest rate? 6.5, 7.2, 7.4 or 7.8?

Answer 1

Assuming y is annual interest rate
400,000 x y/100 = 2,600
$2600/$400000 x 100 = 0.65% (monthly)
There's 12 months in a year, so 0.65% x 12 = 7.8%

The answer is 7.8%

Hope this helps.

Answer 2

(annual interest)/(loan amount) = interest rate
(12×$2,600)/$400,000 = .078 = 7.8% . . . . annual interest rate