Question

What is the present interest rate on a variable interest loan if the margin is 1.9% and linked to the prime rate, which is currently at 5.2%?

8.3%
5.2%
1.9%
7.1%

Answer 1

To find the present interest rate on a variable interest loan, add the margin of 1.9% to the prime rate of 5.2%, which totals to 7.1%. Therefore correct option is D

Step-by-step explanation:

The interest rate on a variable interest loan can be determined by adding the margin to the index rate,

in this case, the prime rate. With the margin given as 1.9% and the prime rate currently at 5.2%, the present interest rate on the loan would be the sum of these two figures.

To calculate: 1.9% (margin) + 5.2% (prime rate) = 7.1% (total interest rate).

Therefore, the current interest rate on the variable interest loan is 7.1%.

Answer 2

D) 7.1%

Step-by-step explanation:

To determine the present interest rate on a variable interest loan with a margin of 1.9% linked to the prime rate, you add the margin to the current prime rate.

In this case:

• Margin = 1.9%
• Prime Rate = 5.2%

Therefore:

`\begin{aligned}\textsf{Present Interest Rate}&= \sf Prime\; Rate+Margin\\&=5.2\% + 1.9\%\\&= 7.1\%\end{aligned}`

So, the present interest rate on the variable interest loan is 7.1%.