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

a) What is the size of the payment made on August 13, 2022?

b) When will the loan be paid off?

Answer 1

Ans: Annual Interest Rate=7%

Interest only Loan= 80,000

First payment Scheduled for June 13,2022

Paid amount on June 13,2022 as regular payment 1,500

Using Interest Calculate formulae

Interest amount= P*T*R

=> 80,000*7%*1/12

=> 466.67

By this way for 2 Months i.e. from June 13,2022 to Aug 13,2022 amount that should be liable to pay is 466.67*2

=> 933.34 but the actual amount paid is 1,500 that means he has paid for minimum 3 months

that further states that No amount is liable to be paid on Aug 13,2022

2.Since, 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.as Loan is completely paid off at the end of loan Period