Question

Read the graph that displays interest and total payments on a loan.

A 3-column table titled Interest and Total payments 10,000 dollar loan over 5 years has 4 rows. The first column is labeled Interest rate with entries 5, 10, 15, 18 percent. The second column is labeled Monthly payment with entries 188.70, 212.50, 237.90, and 253.90. The third column is labeled Total paid with entries 11,322.00, 12,750.00, 14,274.00, and 15,234.00.

Banks make the most money and take the most risk with an interest rate of

5 percent.
10 percent.
15 percent
18 percent.

Answer 1

18 percent.

At 18% the monthly payment (253.90) and total paid (15,234.00) are highest, so the bank collects the most interest. Higher rates are also used to compensate lenders for greater borrower risk.