PNair4928 PNair4928

30-11-2022
Business

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on january 1, year 1, mahoney company borrowed $164,000 cash from sun bank by issuing a 5-year, 8% term note. the principal and interest are repaid by making annual payments beginning on december 31, year 1. the annual payment on the loan equals $41,075. what is the amount of principal repayment included in the payment made on december 31, year 1?

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Tutorconsortium433 Tutorconsortium433

02-12-2022

164,000*8% = 13,120

41,075 - 13,120 = 27,955

The principal is the sum of money you initially promised to repay. The cost of borrowing the principal is interest.

How are principal payback amounts determined?

Each payment's principle balance is the same for even principal payments. It is easily calculated by dividing the initial loan amount by the number of installments. When a bond matures, the principal—the sum of money the bond's issuer borrowed—will be fully repaid to the bondholder.

Which is preferable, principle or payment?

As shown above, you can lower your overall interest costs by making additional principal payments. Making more principal-only payments can help you develop equity in your house faster because every payment that goes toward principle increases your property's value.

To learn more about Principal Repayment visit:

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