Your Company Has Just Taken Out a 1-Year Installment Loan

question 113

Multiple Choice

Your company has just taken out a 1-year installment loan for $72,500. The nominal rate is 12.0%, but with equal end-of-month payments. What percentage of the SECOND monthly payment will go toward the repayment of principal?

• A) 76.85%
• B) 80.89%
• C) 85.15%
• D) 89.63%

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Definitions:

Use Of Debt

The practice of borrowing funds to finance activities, investments, or purchases, often as a strategic financial decision.

Current Ratio

A liquidity ratio that measures a company's ability to pay short-term obligations or those due within one year.

Liquid Assets

Assets that can be quickly and easily converted into cash without significant loss in value.

Liabilities

Financial obligations or debts that an individual or organization owes to others.