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Beth borrowed $1,500 from the bank at 8 percent interest and will make interest-only
payments until the end of the year when she will pay off the entire amount. How much
will her last payment for the entire amount be?

Answer :

ADIOABIOLAGO

The amount which will be paid by Beth as her last payment is; $1510

Interest and Principal

According to the question;

  • Beth borrowed $1,500 from the bank at 8 percent interest.

Hence, the total interest to be paid is;

  • Interest, I = (8/100) × $1500

  • Interest, I = $120

The interest is spread equally over 12 months of the year and hence, the amount to be paid each Month is; $120/12

Monthly interest payment = $10

Hence, at the end of the loan term, Beth's last payment will be;

Last payment = $10 + $1500 = $1510

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