In the Henry–Susan transaction, what was the loan interest rate?

• A. 8%
• B. 7%
• C. 10%
• D. 9%

Answer: (D)

The main idea here is recognizing the contract rate of a loan—the note rate. In any financing, the rate stated on the promissory note is the interest rate used to calculate the interest and monthly payments, regardless of other numbers like the APR that might include fees or points. For the Henry–Susan transaction, the loan’s contract rate was nine percent per year. That nine percent is the actual loan interest rate, which is why it’s the correct choice. The other percentages would be relevant only if they were the rate stated on the note or they reflected a different measure (like the APR after fees), but they aren’t the note rate in this case.