Question

Suppose that the federal debt in 2020 is $19 trillion. If interest rates remain at the 2016 level of 28%, find the annual interest payment on the debt. How much does the interest payment change with a 0.6-point increase in the interest ratio?

The interest payment increases from $___ billion to $___ billion.
The interest rate increases by about __% and the interest payment increases by about __%.

a) $5.32 billion to $5.5 billion; 2%; 3%
b) $5.36 billion to $5.52 billion; 1%; 2%
c) $5.38 billion to $5.54 billion; 2%; 4%
d) $5.30 billion to $5.48 billion; 3%; 5%

Answer 1

The annual interest payment on the debt is $5.32 trillion. With a 0.6-point increase in the interest ratio, the interest payment increases to $5.44 trillion. The interest rate and interest payment both increase by about 2%.

Step-by-step explanation:

To calculate the annual interest payment on the debt, we need to multiply the debt amount by the interest rate. In this case, the federal debt in 2020 is $19 trillion and the interest rate is 28%.

So, the annual interest payment on the debt is $19 trillion x 28% = $5.32 trillion.

If the interest ratio increases by 0.6 points, the new interest ratio would be 28% + 0.6% = 28.6%. To find the new interest payment, we multiply the debt amount by the new interest ratio.

So, the new interest payment is $19 trillion x 28.6% = $5.44 trillion.

The interest payment increases from $5.32 trillion to $5.44 trillion. The interest rate increases by about 2% and the interest payment increases by about 2% as well.