Question

Lev has purchased a car for $5,000 with the help of a $3,000 loan from the local bank. The annual percentage rate (APR) for the loan is 6.5%. How much interest will Lev pay the first month of the loan?

a) $16.25

b) $19.50

c) $32.50

d) $48.75

Answer 1

Lev will pay $16.25 in interest for the first month of the loan, which is calculated by dividing the annual interest ($195) by 12 months.

Step-by-step explanation:

To calculate the amount of interest Lev will pay in the first month of the loan, we need to use the formula for monthly interest which is the principal amount times the annual interest rate divided by 12 months. In this case, Lev has a $3,000 loan with an annual percentage rate (APR) of 6.5%. The interest for the first month is calculated as follows:

• Annual interest = 6.5% of $3,000 = 0.065 * $3,000 = $195
• Monthly interest = $195 / 12 months = $16.25

Therefore, the monthly interest Lev will pay in the first month is $16.25, which corresponds to option (a).