You are borrowing $1,000 with an APR of 10% and a loan maturity of one year.Total interest charges will be the highest when ____________.
A)you pay off the loan in 12 monthly installments
B)you pay off the loan in 10 monthly installments
C)you make one payment in full at the end of the year
D)you prepay the loan 6 months prior to the maturity of the loan

Question

You are borrowing $1,000 with an APR of 10% and a loan maturity of one year.Total interest charges will be the highest when ____________. ​
A)you pay off the loan in 12 monthly installments
B)you pay off the loan in 10 monthly installments
C)you make one payment in full at the end of the year
D)you prepay the loan 6 months prior to the maturity of the loan

Quizplus · Accepted Answer

The total interest charges for a loan are the highest when you make one payment in full at the end of the year. This is because the interest on the loan will accrue over the entire year and will not be reduced by any monthly payments. If the loan is paid off in monthly installments or pre-paid before maturity, the total amount of interest charged will be lower.

You Are Borrowing $1,000 with an APR of 10% and a Loan