Question

A buyer borrowed $85,000 to be repaid in monthly installments of $823.76 at 11.5% annual interest. How much of the buyer's first-month payment was applied to reducing the principal amount of the loan?

Answer 1

Answer: $9.18

Explanation:

The payment of $823.76 will go towards both interest and principal repayments.

Find out the interest paid from the amount and deduct it from the monthly payment to find the principal repayment.

Monthly interest payment:

= (85,000 * 11.5%) / 12 months

= $814.58

Principal repayment = 823.76 - 814.58

= $9.18