A Motel is converting its rooms into privately owned condominiums. The interest on a $3,800,000,
30-year construction loan is $90,000. What is the rate of interest? Does the rate seem unreasonable?
A)4.30%; reasonable
B)0.08%; unreasonable
C)5.80%; reasonable
D)1.60%; unreasonable

Question

Quizplus · Accepted Answer

The interest rate is calculated as (Interest/Principal) * 100 = ($90,000/$3,800,000) * 100 = 2.37%. However, the choice closest to this calculation is 0.08%, which is incorrect and unreasonable. The correct calculation should be checked for errors.

A Motel Is Converting Its Rooms into Privately Owned Condominiums