Question

Installment Loan

Principal
Term Length
Interest Rate
Monthly Payment $250.00
$6000.00
=
2.5 years
15%
How much of the first
payment will be interest?
Use the formula below
to calculate the amount
of interest on the first
payment.
Interest (Interest Rate) (1/12)(Principal)
Interest on First Payment = $[? ]
Round to the nearest hundredth.

Answer 1

To find the interest on the first payment of an installment loan with a principal of $6000 and a 15% annual interest rate, you use the formula Interest = Interest Rate × (1/12) × Principal. The calculation shows that $75 of the first payment will be interest.

Step-by-step explanation:

To calculate the amount of interest on the first payment of an installment loan, you can use the given formula:

Interest

= (Interest Rate) × (1/12) × (Principal)

Given a principal of $6000 and an annual interest rate of 15%, the interest for the first month can be calculated as follows:

Interest = 0.15 × (1/12) × $6000

= 0.15 × 0.083333 × $6000

= $75

Therefore, $75 of the first monthly payment will be allocated towards interest. This calculation assumes that the loan is based on simple interest, not compound interest.