BUSINESS ADMINISTRATION
BUSINESS MATHEMATICS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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principal amount
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rate
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paid loan
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time
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Detailed explanation-1: -A variable rate loan is a type of loan where the interest changes according to changes in market interest rates. Unlike a fixed-rate loan, where borrowers pay a constant interest rate, a variable rate loan comprises varying monthly payments that change according to the market interest rate changes.
Detailed explanation-2: -Simple interest is calculated by multiplying loan principal by the interest rate and then by the term of a loan. Simple interest can provide borrowers with a basic idea of a borrowing cost. Auto loans and short-term personal loans are usually simple interest loans.
Detailed explanation-3: -Some examples of fixed expenses include: Mortgage or rent payments. Loan payments, such as auto loans or student loans. Insurance premiums, such as for car insurance and homeowners insurance.
Detailed explanation-4: -For example, if someone took out a loan with a variable rate of LIBOR + 5%, and LIBOR was at 3.58% at the time they took out the loan, then their variable rate would have been 8.58%. When the LIBOR rate changed to 1.82%, the variable rate then changed to 6.82%.