Asked by Ariana Khojandpour on Jun 06, 2024
Verified
Mike has a credit card debt of $7,000 at a rate of 14%, a car loan of $10,000 at 8% and a $250,000 mortgage at a rate of 6.5%. His average interest rate is 6.9%
Credit Card Debt
A type of unsecured liability which accrues when a consumer purchases goods or services with a credit card and fails to pay back the borrowed amount within the stipulated period.
Car Loan
A personal loan used to purchase a car, paid back in installments over a period of time, usually with interest.
Mortgage Rate
The interest rate charged on a mortgage, determining the size of the monthly payments by the borrower to the lender.
- Comprehend the principle of the average interest rate and its utilization in managing debt.
Verified Answer
KM
Kealeboga ModubuJun 09, 2024
Final Answer :
False
Explanation :
The average interest rate is not simply the average of the three rates because it does not account for the different loan amounts. The weighted average interest rate should be calculated based on the proportion of each debt to the total debt.
Learning Objectives
- Comprehend the principle of the average interest rate and its utilization in managing debt.