Question

Trek Holidays company signed a 7%, 10- year note payable for $166,000. The company paid an instalment of $2,500 for the first month. What portion of the monthly payment is principal? (Do not round any intermediate calculations, and round your final answer to the nearest dollar.)

a. $1,532
b. $16,333
c. $4,980
d. $4,032

Answer 1

Answer:

a. $1,532

Explanation:

The note payable is 166,000 and 7% so the yearly interest on the note payable is 0.07*166,000=11,620

In order to find the monthly interest rate we will divide 11,620 by 12

11,620/12=968.3

In order to find the monthly principal we will subtract the monthly interest from

the monthly payment of 2,500

2,500-968.3=1,531

We can round that of to 1532 for the answer from the options.