Posted by **matt** on Thursday, May 26, 2011 at 4:52pm.

Suppose a person pays $80 of annual interest on a loan that has a 5 percent annual interest rate. The loan

amount is:

A. $400.

B. $1,600.

C. $160.

D. $85.

10. Suppose a loan customer is considering two alternative $22,000 loans. Loan 1 requires payment of $1,100

of interest each year and Loan 2 has a 6 percent annual interest rate. Other things equal, the loan customer will:

A. be indifferent between the two loans because they both have the same annual percentage rate.

B. reject both loans because they each carry too high an interest rate.

C. choose Loan 1 because it has a lower annual interest rate than Loan 2.

D. choose Loan 2 because it has a lower annual interest rate than Loan 1.

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