A business just borrowed $500,000 to build a new restaurant. The loan terms call for equal...
A business just borrowed $500,000 to build a new restaurant. The
loan terms call for equal annual payments at the end of each year.
The loan is for 10 years at an APR of 10.00 percent. How much of
the first annual payment will be used to reduce the principal
balance?
Homework Answers
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Answer:
P = PV*r / [1-(1+r)^-n]
P = 500000*0.1 / [1-(1+0.1)^-10]
P = 50000/ [1-0.3855]
P = 50000/ 0.6144
P = 81372.70
First Repayment = 81372.70
Interest for first year = 500000*0.1 = 50000
Repayment Principal Amount = 31372.70
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