Question

You purchase a new yacht worth $935,000 by making a $200,000 down payment and financing the remaining balance with a 10-year loan charging annual interest at a rate of 8. 5%, compounded monthly. How much of your first monthly payment is applied to the principal? round your answer to the nearest cent.

Answer 1

To find out how much of your first monthly payment is applied to the principal, you need to calculate the monthly payment amount using the loan details and subtract the interest portion from the total payment.

Step-by-step explanation:

To calculate how much of your first monthly payment is applied to the principal, you first need to determine the monthly payment amount using the loan details. The remaining balance after the down payment is $935,000 - $200,000 = $735,000.

Next, you can use the formula for calculating the monthly payment on a loan:

Monthly Payment = (Loan Amount * Monthly Interest Rate) / (1 - (1 + Monthly Interest Rate)^(-n))

Where:

• Loan Amount = $735,000
• Monthly Interest Rate = (8.5% / 100) / 12 = 0.00708333
• n = 10 * 12 = 120

By substituting these values into the formula, you can calculate the monthly payment amount. Finally, you can subtract the interest portion of the first monthly payment from the total payment to find the amount applied to the principal. Remember to round your answer to the nearest cent.