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On January 1, 2012, Coté Limited issues a $27,232, 5% 3-year note payable. The note calls for three annual payments of $10,000, blended principal and interest. The first payment is to be made on December 31, 2012.
-The total amount of interest that will be paid over the term of the loan is
A) $2,767.
B) $929.69.
C) $10,000.
D) $2,291.29.

Question

Quizplus · Accepted Answer

The total amount of interest paid over the term of the loan can be calculated by subtracting the original loan amount from the total payments made. The total payments made are 3 payments of $10,000 each, totaling $30,000. Subtracting the original loan amount of $27,232 from this gives $2,768 (rounded from $2,767.68), which is the total interest paid over the term of the loan.

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