Question

The Jamison Company issues a $800,000, 6%, 20-year mortgage note on December 31, 2014, to obtain financing for purchase of a building. The terms provide for semiannual installment payments of $34,610. What is the principle balance after the first interest period?

Answer 1

Answer:

Ans. The principle balance after the first interest period is $789,390

Explanation:

Hi, first, we have to turn all the relevant values to equal the period of payment, I mean, 20 years into semesters and the annual rate of 6% into a semi-annual rate, that is 6%/2=3% semi-annual.

Now, this is the math of the problem.

Initial Balance =   $800,000

(+)Interest=           $   24,000 (this is 800,000x3%=24,000)

(-)Payment=         -$   34,610

(=)Final Balance= $789,390

Best of luck.