In the Henry–Susan example, what was Henry's interest rate on the loan?

In the Henry–Susan example, what was Henry's interest rate on the loan?

• A. 7%
• B. 8.5%
• C. 10%
• D. 9%

Answer: (D)

Interest rate is the annual cost of borrowing and is the rate used to compute the interest portion of each payment. In the Henry–Susan example, the numbers given for Henry’s loan (the payment and term) match a nine percent rate. If you plug a 9% rate into the standard loan payment setup, the resulting monthly payment and total interest align with the example, whereas using other rates would produce different payments and totals that don’t fit the scenario. Remember, the rate in question is the loan’s interest rate, not the APR or any points/fees that might be present. So the loan’s interest rate in that example is nine percent.

Interest rate is the annual cost of borrowing and is the rate used to compute the interest portion of each payment. In the Henry–Susan example, the numbers given for Henry’s loan (the payment and term) match a nine percent rate. If you plug a 9% rate into the standard loan payment setup, the resulting monthly payment and total interest align with the example, whereas using other rates would produce different payments and totals that don’t fit the scenario. Remember, the rate in question is the loan’s interest rate, not the APR or any points/fees that might be present. So the loan’s interest rate in that example is nine percent.