Your firm intends to finance the purchase of a new construction crane.The cost is $1,500,000.What is the size of the first payment if the crane is financed with an interest-only loan at an annual rate of 8.50%?
A)$228,611.56
B)$127,500.00
C)$3,391,475.16
D)There is not enough information to answer this question.

Question

Quizplus · Accepted Answer

An interest-only loan means that the borrower only pays interest on the loan each period, so the first payment would be the interest for the first period. To calculate this, we can use the formula:

First payment = loan amount x interest rate

Plugging in the numbers:

First payment = $1,500,000 x 0.085 = $127,500

Therefore, the answer is B.

Your Firm Intends to Finance the Purchase of a New