Understanding Monthly Interest Payments: A Quick Guide for Arizona Real Estate Students

What is the monthly interest payment of an account with a balance of $6,800 and an interest rate of 12%?

• A. A. $68
• B. B. $78
• C. C. $88
• D. D. $98

Answer: (A)

To determine the monthly interest payment on an account balance of $6,800 with an annual interest rate of 12%, you first need to calculate the annual interest amount. The annual interest can be found using the formula: Annual Interest = Principal Balance × Annual Interest Rate For this scenario: Annual Interest = $6,800 × 0.12 = $816 Since we are looking for the monthly interest payment, you divide the annual interest by 12 (the number of months in a year): Monthly Interest Payment = Annual Interest / 12 Taking the previous calculation: Monthly Interest Payment = $816 / 12 = $68 This calculation shows that the monthly interest payment of $6,800 at an annual interest rate of 12% is indeed $68. This is why this choice is correct. The other options represent incorrect calculations based on the principal or interest rate, leading to higher amounts that do not accurately reflect the actual monthly interest payment derived from the given balance and interest rate.

When you're gearing up for the Arizona Real Estate License exam, one of the fundamental concepts you're going to stumble upon is calculating monthly interest payments. Have you ever thought about how those figures come together? Let's break it down so it's crystal clear.

Here's a hypothetical scenario to consider: imagine you’ve got an account balance of $6,800 and it’s earning an interest rate of 12% — sounds interesting, right? You might wonder, what’s that monthly interest payment going to look like? Well, let’s do some math!

To calculate the monthly interest, you start off with figuring out the annual interest. The formula here is pretty straightforward:

Annual Interest = Principal Balance × Annual Interest Rate

So, for our beloved balance of $6,800, it goes like this:

Annual Interest = $6,800 × 0.12 = $816

You see, it's as easy as pie. Now, maybe you’re thinking: “Wait a minute, why annual interest? I want to pay my bills monthly!” Right you are! To find out what you'll be paying each month, you simply divide that annual figure by 12 — the number of months in a year.

Monthly Interest Payment = Annual Interest / 12

Following through with the numbers:

Monthly Interest Payment = $816 / 12 = $68

And there it is: your monthly interest payment on an account balance of $6,800 at a 12% interest rate is exactly $68. If the math is feeling a little intimidating, remember — it’s all about breaking it down into bite-sized pieces. Easy peasy, right?

Now, you might be wondering why the other options don’t cut it. Well, that’s because they represent calculations gone astray — perhaps using incorrect figures or misreading the interest rate. It’s common for students to miscalculate under pressure, especially on an exam. Knowing your numbers inside and out is key.

Want to make your studying even more effective? Here’s a good tip: practice regularly with real-life scenarios, like analyzing different account balances and interest rates. This doesn’t just ready you for the exam — it equips you for financial decisions in your future career as a real estate professional.

Plus, getting cozy with these calculations will bolster your confidence when you walk into that exam room. It may even make you feel like a finance wizard, and who wouldn’t want that?

So, as you prepare for the Arizona Real Estate License exam, keep this formula handy. Understanding interest payments isn't just a number game; it’s a stepping stone towards being a savvy real estate agent. Good luck, and remember to embrace the numbers! They’re on your side.