Question

On May 13, 2022, a college graduate takes an interest-only loan of $80,000 at an annual interest rate of 7%. The first payment is scheduled for June 13, 2022. On June 13, 2022, instead of making the regular-size payment, he pays 1,500. Each month after that he makes the regular payment 3a) What is the size of the payment made on August 13, 2022? 3b) When will the loan be paid off? 7778025 y4 7036 95175209 :360471592 e45556666778889 4455681 4 7 03 6 0-05-1 7 4 1 9 7 6 5 77.7 8 8 8 8 9 9 9 0 0 0 1 1 1 2. 5% 0% 5% 4. 5 5 6 6 7 7 8 8 9 9 10 10 1 1 2. pt05

Answer 1

Interest only loan:- This means every month on installment basis loan borrower will pay ONLY INTEREST on the principal amount. and the principal amount will be paid at the end of the Loan period only. No Principal amount shall be paid in between the loan period

3a) Answer:-

Calculation of monthly interest to be paid:-

= 80,000 X 7% X 1/12

= 466.67

Therefore monthly interest to be paid is 466.67

on June 13,2022 ( !st installment) he pays $1,500 but was payable only 466.67

That means he had paid interest for minimum of 3 month

Therefore on August 13, 2022 (3rd installment) there is no need to pay any amount as he had paid 3 months installment in 1st installment itself

3b) Answer:-

Loan principal amount will be completely paid off at the end of the loan period. Here in the question the term of the loan period is not clearly mentioned.

Therefore the loan amount will be paid off at the end of the term of the loan.