Multiple Choice:If you can afford to pay $900 per month, and you have $50,000 in debt in an interest-only

Question

loan which charges an annual interest rate of 9% (compounded monthly), it will take you 6 years to pay off your debt. If you owe $100,000 rather than $50,000 (and the loan type,interest rate and how much you can afford to pay each month remain the same), then to pay off your debt it will take you

 

a) 6 years or less

b) More than 6 but less than 12 years

c) Exactly 12 years

d) More than 12 years

Answer 1

The total value of a $100,000 loan over 6 years would be ≅ $215,816 which would require almost 239.8 months to repay.

 

239.8 months is more than 6 years, but (by one week) less than 12 years.

 

So, the correct answer is option b