Your firm intends to finance the purchase of a new construction crane. The cost is $1,500,000. What is the size of the first payment if the crane is financed with an interest-only loan at an annual rate of 8.50%?
A) $228,611.56
B) $127,500
C) $3,391,475.16
D) There is not enough information to answer this question.

Question

Quizplus · Accepted Answer

An interest-only loan means that the borrower only pays the interest on the loan for a certain period of time, without reducing the principal. Therefore, the first payment would equal the annual interest due on the loan, which is (0.085 x $1,500,000) = $127,500.

Your Firm Intends to Finance the Purchase of a New