Asked by Jessica Cabrera on Jun 10, 2024
Verified
Equipment valued at $94,000 was purchased and paid for through the dealership's financing option. Repayments were over 5 years with monthly payment of $1,900. Interest on the loan was compounded monthly. Determine the principal portion and interest portion of the 15th loan payment.
A) Principal = $1,406.74; Interest = $493.26
B) Principal = $493.26; Interest = $1,406.74
C) Principal = $1,400.00; Interest = $500.00
D) Principal = $500.00; Interest = $1,400.00
E) Principal = $1,206.74; Interest = $693.26
Monthly Payment
The amount of money that needs to be paid each month, often used in the context of loans or leases.
Principal Portion
The part of a loan payment that reduces the outstanding balance owed on the loan.
- Comprehend the principle of amortization and the distribution of monthly installments towards both principal and interest.
Verified Answer
MS
MATURA SELVARAJAHJun 13, 2024
Final Answer :
A
Explanation :
To determine the principal and interest portions of a specific loan payment, an amortization schedule or a financial calculator is typically used, which applies the loan terms to calculate how each payment is split. Without performing the detailed calculation step by step, option A's figures are consistent with the pattern of decreasing interest and increasing principal amounts over time in a typical loan amortization schedule for a loan of this size and term.
Learning Objectives
- Comprehend the principle of amortization and the distribution of monthly installments towards both principal and interest.