A company lends its supplier $150,000 for 3 years at a 6% annual interest rate.Interest payments are to be made twice a year.Each interest payment will be for:

Question

Quizplus · Accepted Answer

Since interest payments are to be made twice a year, the annual interest rate needs to be divided by 2.
Therefore, the semi-annual interest rate is 6% / 2 = 3%.

The interest payment each 6 months is calculated as:
Interest Payment = Principal x Semi-annual Interest Rate
Interest Payment = $150,000 x 3% = $4,500

Therefore, the best choice is C, which represents the correct interest payment amount.

A Company Lends Its Supplier $150,000 for 3 Years at a 6