To calculate the Annual Interest Charge, multiply which two quantities?

To calculate the Annual Interest Charge, multiply which two quantities?

• A. Principal and Interest
• B. Initial loan amount and note rate
• C. Closing costs and fees
• D. Taxes and insurance

Answer: (B)

Interest charged in a year is determined by multiplying the amount borrowed by the annual interest rate. The initial loan amount represents the principal, and the note rate is the annual rate applied to that principal. So the Annual Interest Charge equals principal × note rate (with the rate expressed as a decimal). The other items are upfront costs or escrow items, not part of calculating the annual borrowing cost.

Interest charged in a year is determined by multiplying the amount borrowed by the annual interest rate. The initial loan amount represents the principal, and the note rate is the annual rate applied to that principal. So the Annual Interest Charge equals principal × note rate (with the rate expressed as a decimal). The other items are upfront costs or escrow items, not part of calculating the annual borrowing cost.