Certified Regulatory Compliance Manager (CRCM) — Question 290

Mrs. Franklin has two mortgage loans at First National Bank on which she makes monthly payments. On Loan A she made 13 payments last year, mailing the last payment on December 28. It was received the afternoon of January 2 and credited on January 3. The amount of interest paid on Loan A in the first 12 payments was $1,000. There was $155 of interest on the 13th payment. On Loan B, she made 12 payments; each contained interest accrued to the fourth day of the month.
The last payment was mailed on December 19 and was received and credited on December 23. The last payment contained interest accrued to January 4. The total interest paid on Loan B was $2,000, of which $100 accrued between January 1 and January 4 of the next year. How much interest must First National Bank report?

Answer options

• A. $1,155 for Loan A and $2,000 for Loan B
• B. $1,155 for Loan A and $2,100 for Loan B
• C. $1,000 for Loan A and $2,000 for Loan B
• D. $1,000 for Loan A and $2,100 for Loan B

Correct answer: C

Explanation

The correct answer is C because for Loan A, the interest reported is $1,000 from the first 12 payments plus $155 from the 13th payment, but since the 13th payment was credited in the next year, $1,155 is not reported. For Loan B, the total interest is $2,000, which does not include the interest accrued after the last payment was credited. Options A, B, and D incorrectly include interest that should not be reported for the respective loans.