A buyer obtains a loan for $200,000 at 6% annual interest. What is the monthly interest payment for the first month?
Question & Answer
Review the question and all answer choices
$1,200
Option A is incorrect because it represents half of the annual interest divided by 6 months rather than the correct calculation. This error typically occurs when students incorrectly divide by 10 instead of 12.
$1,000
$12,000
Option C is incorrect because it shows only the annual interest amount without dividing by 12. This mistake happens when students forget to convert the annual interest to a monthly payment.
$600
Option D is incorrect because it represents 1/4 of the annual interest divided by 3 months. This error typically occurs when students incorrectly divide by 4 instead of 12.
Why is this correct?
Answer B is correct because it properly converts the annual interest to a monthly amount by dividing the annual interest ($12,000) by 12 months. This follows the fundamental principle that monthly interest is 1/12th of the annual interest.
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