3. National City Corporation quoted a rate of 4.5% simple interest for the 2019-20 school year. It offers an interest-only repayment option, under which you make monthly interest payments for the year and pay on the principal only after graduation. How much monthly interest would you pay for a $10,000 loan?

3. National City Corporation quoted a rate of 4.5% simple interest for the 2019-20 school year. It offers an interest-only repayment option, under which you make monthly interest payments for the year and pay on the principal only after graduation. How much monthly interest would you pay for a $10,000 loan?

Pfin (with Mindtap, 1 Term Printed Access Card) (mindtap Course List)

7th Edition

ISBN:9780357033609

Author:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk

Publisher:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk

Chapter7: Using Consumer Loans

Section: Chapter Questions

Problem 7FPE: Calculating interest and APR of installment loan. Assuming that interest is the only finance charge,...

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Del Hawley, owner of Hawleys Hardware, is negotiating with First City Bank for a 1-year loan of 50,000. First City has offered Hawley the alternatives listed here. Calculate the effective annual interest rate for each alternative. Which alternative has the lowest effective annual interest rate? a. A 12% annual rate on a simple interest loan, with no compensating balance required and interest due at the end of the year b. A 9% annual rate on a simple interest loan, with a 20% compensating balance required and interest due at the end of the year c. An 8.75% annual rate on a discounted loan, with a 15% compensating balance d. Interest figured as 8% of the 50,000 amount, payable at the end of the year, but with the loan amount repayable in monthly installments during the year
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