A margin loan for $20,000 is charged an effective interest rate of 8.5 percent. If the loan is repaid in 9 months, how much interest is charged?
A) $1,275.00
B) $1,243.13
C) $1,261.91
D) $1,226.34
E) $1,276.54

Question

Quizplus · Accepted Answer

The interest charged is calculated using the formula for simple interest: Interest = Principal x Rate x Time. Here, Principal = $20,000, Rate = 8.5% (or 0.085), and Time = 9/12 years. Thus, Interest = $20,000 x 0.085 x (9/12) = $1,261.91.

A Margin Loan for $20,000 Is Charged an Effective Interest