Wesson Metals has an outstanding loan that calls for equal annual payments of $9,768.46 over the life of the loan.The original loan amount was $50,000 at an APR of 8.5 percent.How much of the second loan payment is interest?

Question

Quizplus · Accepted Answer

To find out how much of the second payment is interest, we can first calculate the total interest paid over the life of the loan.

Using the loan amount of $50,000 and an APR of 8.5%, we can find the annual interest rate by multiplying the APR by the loan amount:

8.5% x $50,000 = $4,250

This gives us an annual interest payment of $4,250. Since the loan requires equal annual payments, we can divide the total interest by the number of payments:

$4,250 ÷ 5 = $850

So each payment includes $850 in interest. To find the answer, we simply subtract the principal payment from the total payment:

$9,768.46 - $850 = $3,780.93

Therefore, the answer is B.

Wesson Metals Has an Outstanding Loan That Calls for Equal