Question

Last month's loan payment included $412.50 interest on a $60,000 loan balance. What is the annual rate of interest?

A. 7.75%
B. 8.25%
C, 8.5%
D. 7.5%

Answer 1

The annual rate of interest on the loan is approximately 0.69%.

Step-by-step explanation:

To determine the annual rate of interest, we can use the formula:

Interest = Balance x Rate x Time

Given that the monthly payment included $412.50 as interest on a $60,000 loan balance, and assuming the loan is for one year, we can rearrange the formula to solve for the rate:

Rate = Interest / (Balance x Time)

Substituting the given values into the formula:

Rate = $412.50 / ($60,000 x 1) = 0.006875

Converting the rate to a percentage:

Rate = 0.006875 x 100% = 0.6875%

This means that the annual rate of interest on the loan is approximately 0.6875% or 0.69%.