Question

On july 1, shady creek resort borrowed $280,000 cash by signing a 10-year, 9.5% installment note requiring equal payments each june 30 of $44,595. what amount of interest expense will be included in the first annual payment?

Answer 1

$26,600

Step-by-step explanation:

the total amount of interest expense included in the first annual principal (or any annual payment actually) = principal's balance x yearly interest rate

$280,000 x 9.5% = $26,600

the principal's balance after the first payment = $280,000 - $26,600 = $253,400

the interest expense included in the second payment = $253,400 x 9.5% = $24,073