Question

The hotel you manage just purchased a new piece of property that is financed with a $200,000 amortized loan. If this loan is to be paid off in 4 equal, end-of-the-year annual payments and has an interest rate of 8.00%, how much of the third year's payment goes toward paying principal?

A. $50,000.00
B. $38,827.27
C. $51,769.69
D. $60,384.16
E. $46,592.72

Answer 1

The amount of the third year's payment that goes towards paying the principal on the loan is $60,384.16. The correct option is D.

Step-by-step explanation:

To calculate the amount of the third year's payment that goes towards paying the principal on a $200,000 amortized loan with an interest rate of 8.00% and 4 equal, end-of-the-year annual payments, you can use the formula for calculating the payment amount of an amortized loan. The formula is:

Payment = Principal / Discount factor

Discount factor = (1 - (1 + interest rate)^(-n)) / interest rate

Substituting the values into the formula, we can calculate the payment amount for the loan:

Payment = $200,000 / ((1 - (1 + 0.08)^(-4)) / 0.08) = $60,384.16

Therefore, the amount of the third year's payment that goes towards paying the principal is $60,384.16.