If a country has a $100 million debt and the interest rate on the debt is 5% and the debt is serviced each year, this would result in:
A) an interest payment of $5 million and a reduction in the debt amount by $10 million each year.
B) an interest payment of $15 million and a reduction in the debt amount by $10 million each year.
C) an interest payment of $5 million and no change in the debt amount.
D) an interest payment of $1 million and an increase in the debt amount by $10 million each year.

Question

Quizplus · Accepted Answer

An interest rate of 5% on a $100 million debt results in an interest payment of $5 million annually. If only the interest is serviced, the principal amount of the debt remains unchanged.

If a Country Has a $100 Million Debt and the Interest