Travis borrowed $10,000 four years ago at an annual interest rate of 7 percent.The loan term is six years.Since he borrowed the money, Travis has been making annual payments of $700 to the bank.Which type of loan does he have?

Question

Quizplus · Accepted Answer

In an interest-only loan, the borrower pays only the interest each period, and the principal is repaid at the end of the loan term. Travis's annual payments of $700 cover only the interest (7% of $10,000), indicating an interest-only loan.

Travis Borrowed $10,000 Four Years Ago at an Annual Interest