Question

Hayley makes annual endminus−ofminus−year payments of​ $6,260.96 on a fiveminus−year loan with an 8 percent interest rate. the original principal amount was​ ________.

a. ​$30,000


b. ​$31,000


c. ​$25,000


d. ​$20,000

Answer 1

c. ​$25,000

Step-by-step explanation:

For determining the original principal amount we have to applied the Present value formula which is to be reflected in the spreadsheet below:

Given that,

Future value = $0

Rate of interest = 8%

NPER = 5 years

PMT = $6,260.96

The formula is shown below:

= -PV(Rate;NPER;PMT;FV;type)

So after applying the above formula, the principal amount i.e present value is $24,998.20 which is approx $25,000