Question

Will Hopkins is looking to borrow $1,000,000 over 25 years to purchase a piece of property for his boutique destination resort. At a compound annual interest rate of 5.5% and equal monthly payments, what are the first month's approximate interest and principal portions of the loan payment? ob 18 Select one: O a. $54,522 interest; $19,169 principal b. $4,583 interest; $1,558 principal O c. $5,452 interest; $6,140 principal d. Not enough information to calculate interest and principal portions

Answer 1

Ans b. $ 4583 interest; $ 1588 principal

Calculation of interest and principal is as follows:

P = PV = Regular Payments Loan Amount rate of interest no of periods n = P= r(PV) 1 -(1+r)^-n (5.5%/12)*1000000 1-(1/(1+5.5%/12)4300)) 4583.333333 0.746364873 6140.87 Beginning Balance Interest Principal 4583 1558 Ending Balance 993859.13 1000000 Interest in First Payment Principal in First Payment 4583 1558