Question

Jesse took out a 30-year loan for $85,000 at 7.2% interest, compounded monthly. If his monthly payment on the loan is $576.97, how much of his first payment went toward note reduction(reducing principal)? Show your work.

Answer 1

the correct answer for this question is 66.97

Answer 2

$66.97 is his first payment went toward reduction.

Explanation:

Given : Jesse took out a 30-year loan for $85,000 at 7.2% interest, compounded monthly. If his monthly payment on the loan is $576.97.

To find : How much of his first payment went toward note reduction(reducing principal)?

Solution :

First we find the interest of 1 month on a loan of $85,000 at 7.2% interest.

`I=85000* (7.2)/(12* 100)`

`I=85000* 0.006`

`I=510`

Interest of 1 month is $510.

Monthly payment = $576.97

Now, first payment or reducing principal is given by

F= monthly payment - interest of 1 month

F=$576.97- $510

F=$66.97

Therefore, $66.97 is his first payment went toward reduction.