Final answer:
The first installment payment made on December 1, 2025, will be for $10,875 principal plus $5,220 interest, representing the annual 6% interest on the initial loan amount of $87,000.
Step-by-step explanation:
The student is asking about an installment payment for a note with a principal balance and compounded annual interest. On December 1, 2025, they'll make a payment on a note that was for $87,000 at 6% interest per year with annual installment payments of $10,875. We need to determine the interest component for the first year.
To find the interest for the first year, we calculate 6% of the initial loan amount, which is $87,000. The calculation is as follows: $87,000 × 6% = $5,220. This is the interest component for the first year. Therefore, the first installment payment includes this interest of $5,220 plus a portion of the principal, which is $10,875.
So, the correct description of the first installment payment made on December 1, 2025, is $10,875 principal plus $5,220 interest, which matches one of the options provided by the student.