A construction company takes a loan of $280 000 to cover the cost of a new grader. If the interest rate is 8.75%APR, and payments are made monthly for five years, what percentage of the outstanding principal does the company pay in interest each month?

Question

Quizplus · Accepted Answer

The monthly interest rate is the annual interest rate divided by 12 months. 8.75% APR / 12 = 0.729%, which is approximately 0.73%. This calculation gives the monthly interest rate, not the percentage of the principal paid in interest each month, but it's the closest answer to what's being asked based on the provided options.

A Construction Company Takes a Loan of $280 000 to Cover