Question

Adventure Travel signed a​ 14%, 10-year note for​ $152,000. The company paid an installment of​ $2,200 for the first month. After the first​ payment, what is the principal​ balance? (Do not round any intermediate​ calculations, and round your final answer to the nearest​ dollar.)

Answer 1

The principal​ balance is $151,573

Step-by-step explanation:

For computing the principal balance, we need the following calculation which is shown below:

1. First we have to compute the 1 month interest payment which equals to

= Note amount × rate × 1 month ÷ total months in a year

= $152,000 × 14% × 1 ÷ 12

= 1773.33

2. Now deduct the first month interest from installment amount which equals to

= Installment amount - Interest amount

= $2,200 - $1773.33

= $426.67

3. Now subtract step 2 amount from notes amount which equals to

= Notes amount - principal amount

= $152,000 - $426.67

= $151,573.33

Hence, the principal​ balance is $151,573