Sheet Metals has an outstanding loan that calls for equal annual payments of $12,600.47 over the life of the loan. The original loan amount was $72,000 at an APR of 8.15 percent. How much of the third loan payment is interest?

Multiple Choice

$5,868.00

$5,009.16

$4,896.48

$4,725.89

$4,687.53

To determine how much of the third loan payment is interest, we need to break down the loan payments and figure out how much interest is paid in the third payment.

Here's the step-by-step process:

1. **Loan Details**:
   - Original loan amount: $72,000
   - APR (Annual Percentage Rate): 8.15%
   - Annual payment: $12,600.47

2. **Break the APR into a monthly rate**:
   Since the payments are annual, the APR is already aligned with the payment period. Therefore, the interest rate is 8.15% annually.

3. **Determine the loan's interest for each payment**:
   - The loan follows the amortization schedule where early payments consist mostly of interest, while later payments are mostly principal.
   - The interest for each period is calculated based on the remaining balance of the loan after each payment.

4. **Calculate the interest for the third payment**:
   To calculate the interest for the third payment, we first need to find the remaining balance after the second payment. The interest for the third payment is simply the annual interest rate (8.15%) applied to the remaining balance.

   I will now calculate this interest for you.The amount of interest paid in the third loan payment is **$4,725.89**.

The correct answer is:

**$4,725.89**

Would you like more details on the loan amortization or any other concepts? 

Here are 5 related questions to expand on this:

1. How is the principal portion of a loan payment calculated?
2. What is an amortization schedule, and how does it work?
3. How would the loan payments change if the APR were different?
4. What happens to the interest payments over the life of an amortized loan?
5. How can early loan payments save money on interest?

**Tip**: In an amortization schedule, the earlier payments primarily cover interest, while later payments shift more toward reducing the principal balance.

Sheet Metals has an outstanding loan that calls for equal annual payments of $12,600.47 over the life of the loan. The original loan amount was $72,000 at an APR of 8.15 percent. How much of the third loan payment is interest? Multiple Choice: $5,868.00, $5,009.16, $4,896.48, $4,725.89, $4,687.53

Learn how to calculate the interest portion of the third loan payment for a loan of $72,000 with an APR of 8.15%. The problem covers essential concepts such as loan amortization, interest calculations, and the application of the amortization schedule. Suitable for advanced high school or college-level students.

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