Question

Best's fried chicken just took out an interest-only loan of $50,000 for three years with an interest rate of 8.15 percent. payments are to be made at the end of each year. what is the amount of the payment that will be due at the end of year 3?

Answer 1

An interest only loan means that the monthly payments only cover the amount of interest owed each month and DOES NOT pay down any principal. At the end of year 3, they would owe the entire loan principal amount, 50,000