Suppose you take a margin loan for 77000. You pay a 7.0 percent effective rate. If you repay the...

Question:

Suppose you take a margin loan for {eq}77000 {/eq}. You pay a {eq}7.0 {/eq} percent effective rate. If you repay the loan in three months, how much interest will you pay?

Margin Loan:

The margin loan is usually undertaken for a short term period. It can be undertaken to bridge the mismatch between payables and receivables or even taken for an investment in financial assets.

The interest shall be $1,347.50 The simple loan formula shall apply: Interest = Principal * Rate * Time • Principal =$77,000
• Rate = 7.00%
• Time = 3 / 12

Interest = $77,000 * 7.00% * 3 / 12 =$1,347.50