If you have an $800 interest only payment on a 5.75% 30-year loan, what is the loan amount?
Select one:
OA. $174,545
B. $163,404
OC. $166,957
OD. $183,635



Answer :

To solve for the loan amount on an interest-only loan, we can use the formula for an interest-only payment: \[ \text{Interest Payment} = \frac{\text{Loan Amount} \times \text{Interest Rate}}{12} \] Given that the interest payment is $800 and the annual interest rate is 5.75%, we can rearrange the formula to solve for the loan amount: \[ \text{Loan Amount} = \frac{\text{Interest Payment} \times 12}{\text{Interest Rate}} \] Substitute the given values: Interest Payment = $800 Interest Rate = 5.75% or 0.0575 (when converted to decimal form) \[ \text{Loan Amount} = \frac{800 \times 12}{0.0575} \] \[ \text{Loan Amount} = \frac{9600}{0.0575} \] \[ \text{Loan Amount} = 166956.52173913043 \] Since we are looking for the closest match to the provided options for the loan amount, the closest match to $166,957 is option C. Therefore, the correct answer would be: OC. $166,957