Question

You are taking out a $11258 loan. It will be amortized with fixed payments over 10 years. It is to be paid quarterly and the APR is 4%.

What is the interest payment on the loan in the second quarter?

Select one:

a. $112.58

b. $107.29

c. $110.28

d. $108.86

e. $136.22

Answer 1

Loan Amount = $11,258

Time Period = 10 years

Interest Rate = 4% quarterly

Loan has quarterly Payments,

So,

Period = 4*10 = 40

Interest Rate = 1% per quarter

Calculating Quarterly Payment,

Using TVM Calculation,

PMT = [PV = 11258, FV = 0, T = 40, I = 0.01]

PMT = $342.87

So,

Principal Payment in Quarter 1 = 342.87 - (0.01)(11258) = $230.29

Principal Due = $11,027.71

Interest Payment in Quarter 2 = 0.01(11027.71) = $110.28

So,

Interest payment in Quarter 2 = $110.28

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