Suppose a construction project anticipates end-of-month draws of $400,000, $300,000, and $600,000 consecutively. What will be the balance owed at the end of the third month if the interest on the loan is 7% per annum nominal annual rate, compounded monthly), and no payments of either principal or interest are required during the construction period?

Question

Quizplus · Accepted Answer

The correct answer is A because the balance owed at the end of the third month is $1,306,430. This is calculated by taking the sum of the three draws ($400,000 + $300,000 + $600,000 = $1,300,000) and then multiplying by the interest factor (1 + 7%/12)^3 = 1.0175). The result is $1,306,430.

Suppose a Construction Project Anticipates End-Of-Month Draws of $400,000, $300,000