Question

Installment Loan$1500.00PrincipalTerm Length4 yearsThe 40th payment has$275 left in principal.How much of thispayment will gotoward interest?Interest Rate6%Monthly Payment$35.00A. $27.50B. $7.50C. $1.38D. $33.62

Answer 1

Given data:

Principal = $1500.00

Term Length = 4 years

Interest Rate = 6%

Monthly Payment = $35.00

Calculate the Monthly Interest Rate:

`\frac{6\text{\%}}{12}=0.5\text{\%=0.005}`

Given that the 40th payment has $275 left in the principal, the amount that will go towards interest for this payment will be the product of the monthly interest rate and principal:

`0.005*275\text{ = 1.375}`

Therefore,

the amount that would go towards interest is approximately $1.38 [Option C]