With a Fixed Principal Commercial Loan where the amount borrowed is $120,000 for 5 years at 8 percent, the first monthly payment will be
A) $2,000
B) $2,800
C) $9,600
D) $11,600

Question

Quizplus · Accepted Answer

In a Fixed Principal Commercial Loan, the principal repayment is constant each month. The principal repayment is $120,000 / (5*12) = $2,000. The interest for the first month is 8% annual rate on the full principal, which is ($120,000 * 0.08) / 12 = $800. Therefore, the first monthly payment is $2,000 (principal) + $800 (interest) = $2,800.

With a Fixed Principal Commercial Loan Where the Amount Borrowed