California Real Estate Practice Exam

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What would be the final payoff amount if only interest payments were made on a trust deed note of $4,000 after 48 monthly payments at 12% interest?

$4,048
$4,400
$4,040
$4,000

The correct answer is: $4,040

If only interest payments are made, the principal amount of $4,000 would remain the same and only the interest would be paid off. After 48 monthly payments, the total amount of interest paid would be 48 x ($4,000 x 0.12) = $4,320. Therefore, the final payoff amount would be the sum of the principal and total interest paid, which is $4,000 + $4,320 = $8,320. Option A, $4,048, is incorrect because it assumes that the total amount paid would be the sum of the principal and interest, which is incorrect since the principal remains the same. Option B, $4,400, is incorrect because it is the result of only calculating the total amount of interest paid for 48 months without considering the principal amount. Option D, $4,000, is incorrect because it only accounts for the principal amount without considering the interest paid. Therefore, the correct answer is C, $4,040, as it takes into account the principal amount and the total interest paid after 48 monthly payments.