Answer: John's auto Repair will pay an interest of $4160 along with the principal amount of $52,000. Hence the total amount repaid is $56,160.
In an interest-only loan, the borrower will pay only the interest on the loan amount over a fixed time period. At the end of the designated time period, the borrower will have to either renegotiate the tenure and interest rate on the loan or repay the entire principal.
In this question, due to the absence of any other information, we can assume that John's Auto Repair will repay the principal at the end of year 10.
So, in year 10, John's Auto Repair will pay the interest for year 10 and the principal amount.
The interest amount is calculated as [tex]52000*0.08 = 4160[/tex].
The principal is $52000.
Hence the total payment is [tex]52000 + 4160 = 56160[/tex]
