17-06-2018
Mathematics

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The maturity value of a 180-day, 8.75% ordinary interest commercial loan is $83,500. Find the principal.

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sqdancefan sqdancefan

17-06-2018

The appropriate formula for the loan value at maturity is
A = P(1 + rt)

Substituting the given numbers, we have
$83,500 = P(1 + .0875·180/360)
$83,500/1.04375 = P = $80,000

The principal is $80,000.

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