Question

What is the interest rate on an interest only loan, if the principal balance is $574,000, and the annual payment after year 1 is $24,108...?

Answer 1

4.2%

Step-by-step explanation:

Calculation for interest rate on an interest only loan

Using this formula

Interest rate on an interest only loan=Annual payment after year 1/Principal balance

Let plug in the formula

Interest rate on an interest only loan= $24,108/$574,000

Interest rate on an interest only loan= 0.042 ×100

Interest rate on an interest only loan=4.2%

Therefore the Interest rate on an interest only loan will be 4.2%