If the finance charge is $9,000 and the loan amount is $150,000, what is the total interest percentage?

If the finance charge is $9,000 and the loan amount is $150,000, what is the total interest percentage?

• A. 6%
• B. 0.6%
• C. 9%
• D. 3%

Answer: (A)

The main idea is to express the cost of credit as a percentage of the loan amount. Divide the finance charge by the loan amount: 9,000 ÷ 150,000 = 0.06. Convert to a percent by multiplying by 100, giving 6%. So the total interest percentage is 6%. In context, this shows how much of the loan principal the financing charges represent. The other percentages would require different dollar amounts for the finance charge: 0.6% would correspond to $900, 9% would be $13,500, and 3% would be $4,500 on a $150,000 loan.

The main idea is to express the cost of credit as a percentage of the loan amount. Divide the finance charge by the loan amount: 9,000 ÷ 150,000 = 0.06. Convert to a percent by multiplying by 100, giving 6%. So the total interest percentage is 6%.

In context, this shows how much of the loan principal the financing charges represent. The other percentages would require different dollar amounts for the finance charge: 0.6% would correspond to $900, 9% would be $13,500, and 3% would be $4,500 on a $150,000 loan.