What is the first month's interest for a loan of $120,000 at 9% interest?

What is the first month's interest for a loan of $120,000 at 9% interest?

• A. $900
• B. $974
• C. $1,080
• D. $1,170

Answer: (A)

To determine the first month's interest for a loan of $120,000 at an interest rate of 9%, you need to use the formula for calculating interest based on the loan amount and the annual interest rate. First, convert the annual interest rate into a monthly rate. Since interest is typically stated as an annual percentage, you divide the annual rate (9%) by 12 to get the monthly rate. So, the monthly interest rate is: \[ \text{Monthly rate} = \frac{9\%}{12} = 0.75\% \] Next, convert this percentage into a decimal for calculation: \[ 0.75\% = \frac{0.75}{100} = 0.0075 \] Now, apply this monthly rate to the loan amount of $120,000: \[ \text{First month's interest} = \text{Loan amount} \times \text{Monthly rate} \] \[ \text{First month's interest} = 120,000 \times 0.0075 = 900 \] Thus, the first month's interest amount is $900. This computation clearly shows how the percentage is applied to the principal amount,

To determine the first month's interest for a loan of $120,000 at an interest rate of 9%, you need to use the formula for calculating interest based on the loan amount and the annual interest rate.

First, convert the annual interest rate into a monthly rate. Since interest is typically stated as an annual percentage, you divide the annual rate (9%) by 12 to get the monthly rate.

So, the monthly interest rate is:

[

\text{Monthly rate} = \frac{9%}{12} = 0.75%

]

Next, convert this percentage into a decimal for calculation:

[

0.75% = \frac{0.75}{100} = 0.0075

]

Now, apply this monthly rate to the loan amount of $120,000:

[

\text{First month's interest} = \text{Loan amount} \times \text{Monthly rate}

]

[

\text{First month's interest} = 120,000 \times 0.0075 = 900

]

Thus, the first month's interest amount is $900. This computation clearly shows how the percentage is applied to the principal amount,