If a buyer wanted to secure a loan at 5% interest, what amount would they pay in interest on a $96,000 loan after one month?

To determine the amount of interest paid on a $96,000 loan with an interest rate of 5% after one month, you use the formula for calculating monthly interest:

1. First, find the annual interest amount by multiplying the loan amount by the annual interest rate:

Annual Interest = Principal × Interest Rate

= $96,000 × 5% = $4,800.

2. Since the interest is calculated on an annual basis, to find the monthly interest, divide the annual interest by 12 (the number of months in a year):

Monthly Interest = Annual Interest / 12

= $4,800 / 12 = $400.

However, to enhance understanding, let’s look at the calculation based on a monthly basis using the monthly interest rate:

1. Convert the annual interest rate of 5% to a monthly rate:

Monthly Interest Rate = 5% / 12 = 0.4167%.

2. Now, apply this monthly rate to the principal:

Interest for one month = Principal × Monthly Interest Rate

= $96,000 × 0.004167 = $400.

The amount of interest that the buyer would pay on a $96,000