Final answer:
To calculate the principal portion of the first monthly payment, you subtract the interest portion from the total monthly payment. In this case, the principal portion is $20.68.
Step-by-step explanation:
To calculate how much of the first monthly payment will go toward the principal, we need to subtract the interest portion from the total monthly payment. The interest portion can be found by multiplying the outstanding loan balance by the monthly interest rate (annual interest rate divided by 12). The principal portion is then the total monthly payment minus the interest portion.
Given that the monthly payment is $785.26, the interest rate is 13% annual interest, and the loan amount is $71,000, we can calculate the interest portion:
Interest Portion = Outstanding Loan Balance × Monthly Interest Rate
Interest Portion = $71,000 × (13% / 12) = $764.58
Therefore, the principal portion of the first monthly payment is:
Principal Portion = Total Monthly Payment - Interest Portion = $785.26 - $764.58 = $20.68