Question

A property owner borrows $490,000 at a 12% interest rate. How much interest accumulates in the first year?

(Interest / Principal = Interest Rate)

Answer 1

The interest accumulated in the first year is $58,800. This is calculated by multiplying the principal amount ($490,000) by the interest rate (12%).

Step-by-step explanation:

To determine the interest accumulated in the first year, you can use the formula:

`\[ \text{Interest} = \text{Principal} * \text{Interest Rate} \]`

In this case, the principal amount is $490,000, and the interest rate is 12%. To find the interest, you multiply the principal by the interest rate:

`\[ \text{Interest} = $490,000 * 0.12 \]`

`\[ \text{Interest} = $58,800 \]`

Therefore, the interest accumulated in the first year is $58,800. This represents the cost of borrowing the initial principal amount for one year at a 12% interest rate.

It's important to note that this simple interest calculation assumes that the interest is not compounded over the year. If compounding were involved, the calculation would be more complex, taking into account the compounding frequency and the compounding formula. However, in this case, the interest is straightforwardly calculated based on the initial principal and the given annual interest rate.