Question

Harry took out a 25-year loan for $160,000 at 9.6% interest, compounded monthly. If his monthly payment on the loan is $1409.05, how much of his first payment went toward note reduction?

Answer 1

The first payment went toward reduction is $129.05.

Explanation:

Consider the provided information.

Harry took out a 25-year loan for $160,000 at 9.6% interest, compounded monthly. His monthly payment on the loan is $1409.05,

Now, find the interest of 1 month on a loan of $160,000 at 9.6% interest.

`I=160000 * (9.6)/(12 * 100)`

`I=160000 * (0.008)`

`I=1280`

Thus, the Interest of 1 month is $1280.

Monthly payment is $1409.05

First payment or reducing principal is given by:

F = monthly payment - interest of 1 month

F = $1409.05 - $1280

F = $129.05

Therefore, The first payment went toward reduction is $129.05.