Question

A loan is paid off in 15 years with a total of $175,000. It had a 4% interest rate that compounded semi-annually

What was the principal? Round your answer to the nearest dollar

Answer 1

$96,612.41

Explanation:

Answer 2

$96,612

Explanation:

We assume the loan was paid with a single payment, so the future value formula can be used to find the principal. For interest rate r, compounded n times per year for t years, the future value of principal P is ...

FV = P(1 +r/n)^(n·t)

Filling in the given numbers and solving for P, we have ...

$175,000 = P(1 +.04/2)^(2·15) = 1.811362P

P = $175,000/1.811362 = $96,612

The principal of the loan was $96,612.