Question

if john makes annual year-end payments of $8337.83 on a 20-year loan with an annual interest rate of 7.5 percent, what is the original principal amount for john's loan?

Answer 1

The original principal amount for John's loan is $94,618.63.

Step-by-step explanation:

To find the original principal amount for John's loan, we can use the formula for the present value of an annuity. The formula is:

Principal = Payment x [(1 - (1 + interest rate)-n)) / interest rate]

In this case, the payment is $8337.83, the interest rate is 7.5% (or 0.075 as a decimal), and the number of years is 20. Plugging in these values into the formula, we get:

Principal = $8337.83 x [(1 - (1 + 0.075)-20)) / 0.075] = $8337.83 x 11.3280 = $94,618.63