Question

A loan is paid off in 15 years with a total of $192,000. It had a 4% interest rate that compounded monthly.

What was the principal?

Answer 1

Explanation:

Answer 2

$105,477.02

Explanation:

To solve this problem, we need to use a modified version of the compound interest formula:

`P=A/(1}+(r)/(n))^(nt)`

A = total balance

r = interest rate

n = number of times compounded annually

t = time

First, change 4% to its decimal form:

4% ->
`(4)/(100)` -> 0.04

Now, plug in the values:

`P=192,000/(1+(0.04)/(12))^(12(15))`

`P=105,477.02`

The principal was $105,477.02