Real Estate Math

A Mississippi homeowner takes out a $50,000 home equity loan at 7.5% simple annual interest. The monthly interest charge for the first month is:

A$375.00
B$312.50✓ Correct
C$3,750.00
D$156.25

Explanation

Monthly interest = Principal × Annual Rate ÷ 12 = $50,000 × 0.075 ÷ 12 = $3,750 ÷ 12 = $312.50.075 = $3,750 annual; $3,750 ÷ 12 = $312.50. The answer $375.00 would be at 9% annual rate. Correcting: $50,000 × 7.5% ÷ 12 = $312.50. Correct answer index is 1 ($312.50).

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