Question

How much would you pay monthly in interest and in total (P&I) if you took out an interest only loan for $10,000 at 3% for 10 years and did not make any principle payments?

Answer 1

Answer:

Simple interest = principal × rate × time period

Therefore

i) Monthly interest = $10,000 × 3 % × 1/12

= $300 × 1/12

= $25

ii) payment in total ( p & l) = principal + interest for 10 years

= $10,000 + 10,000 × 3% × 10

= $10,000 + $300 × 10

= $10,000 + $3,000

= $13,000