Question

You get a $60,000 loan for a new dump truck. With the truck, you can generate $500 more business each week at 80% margin. Your interest rate on the loan is 8.6%. Does the additional margin generated cover the interest payments?

a) Yes
b) No​

Answer 1

Based on the interest rate and the amount generated, we can infer that Yes, the additional margin does indeed cover the interest payments.

The business generated is per week so the interest payment should also be weekly.

The weekly interest is:

= 8.6% / 12 x 60,000

= $99.23

The business generates $500 at a margin of 80% which means that the amount left is:

= 500 x 80%

= $400

This is enough to cover the $99.23 payments so we can conclude that the interest payments can be covered.

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