Question

The maturity value of a 3-year, 7.2% ordinary interest commercial loan is $500,000. Find the principal.

The answer is $411,184

Answer 1

$411,184.

Explanation:

To find the principal amount for our given commercial loan we will use simple interest formula.

`A=P(1+rt)`

A= Amount after t years.

P= Principal amount.

r= Interest rate in decimal form.

t= Time

First of all let us convert our given interest rate in decimal form.

`r=7.2%=(7.2)/(100) =0.072`

Now let us substitute our given values in above formula.

`500,000=P(1+0.072* 3)`

`500,000=P(1+0.216)`

`500,000=P(1.216)`

`P=(500,000)/(1.216)`

`P=411,184.2105263157894737\approx 411,184`

Therefore, the principal amount is $411,184.