Question

Kayla took out an amortized loan of $240,000 with a 5% interest rate. her monthly payment is $1,288.37. how much will she pay in interest on her first monthly payment?

Answer 1

Kayla will pay $1,000 in interest on her first monthly payment of her amortized loan of $240,000 with a 5% interest rate, with the remainder of her payment reducing the loan's principal.

Step-by-step explanation:

To calculate how much Kayla will pay in interest on her first monthly payment for her amortized loan, we do the following:

• First, determine the monthly interest rate by dividing the annual interest rate by 12. In Kayla's case, that would be 5% / 12 = 0.0041667 (or 0.41667%).
• Next, calculate the interest for the first month by multiplying the total loan amount by the monthly interest rate. Using Kayla's loan of $240,000, the first month's interest would be $240,000 * 0.0041667 = $1,000.
• Thus, of the first monthly payment of $1,288.37, Kayla will pay $1,000 in interest and the remainder, $288.37, will go towards the principal.

It's important to recognize that with an amortized loan, the amount of interest vs. principal changes with each payment, as the remaining balance of the loan decreases over time.

Answer 2

Kayla will pay $1,000 in interest on her first monthly payment.

The interest paid on the first monthly payment of an amortized loan, you can use the formula for monthly interest in an amortizing loan:
Monthly Interest = Loan Balance x Monthly Interest Rate

where:
Loan Balance is the remaining balance on the loan before the payment is made.
Monthly Interest Rate is the annual interest rate divided by 12.

Let's calculate it step by step:
1. First, find the Monthly Interest Rate:
Monthly Interest Rate = Annual Interest Rate / 12
Monthly Interest Rate = 5% / 12 = 0.4167%

2. Next, find the Loan Balance before the first payment. Since it's the first payment, the balance is equal to the original loan amount:
Loan Balance = $240,000

3. Now, calculate the Monthly Interest:
Monthly Interest = Loan Balance x Monthly Interest Rate
Monthly Interest = $240,000 x 0.4167% = $1,000

Therefore, Kayla will pay $1,000 in interest on her first monthly payment.