Understanding Loan Payments and Interest

The video tutorial explains how to calculate monthly interest and balance for a loan of $4000 with an 18% annual interest rate compounded monthly. It demonstrates the process for five months, showing how to convert the interest rate to a decimal, calculate the interest, and adjust the balance after monthly payments. The tutorial highlights how most of the payment goes towards interest rather than reducing the principal balance.

What is the initial loan amount borrowed?

• $4,000

• $6,000

• $3,000

• $5,000

What is the monthly interest rate applied to the loan?

• 1.5%

• 2.0%

• 1.0%

• 2.5%

How much interest is charged during the first month?

• $50

• $80

• $60

• $70

What is the ending balance at the end of the first month?

• $3,930

• $3,920

• $3,940

• $3,910

How much interest is charged during the second month?

• $58.65

• $59.65

• $60.65

• $61.65

What is the ending balance at the end of the second month?

• $3,838.65

• $3,828.65

• $3,818.65

• $3,848.65

How much interest is charged during the third month?

• $56.28

• $57.28

• $58.28

• $59.28

What is the ending balance at the end of the fourth month?

• $3,641.82

• $3,631.82

• $3,621.82

• $3,651.82

How much interest is charged during the fifth month?

• $53.48

• $54.48

• $55.48

• $56.48

What is the ending balance at the end of the fifth month?

• $3,556.30

• $3,546.30

• $3,536.30

• $3,526.30