On January 1, Pablo borrows $5,000 with a fixed interest rate on the loan of 10% and a loan term of 2 years. He will be making monthly payments of $230.72. How much of Pablo's fifth loan payment would be principal?

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To calculate the principal portion of Pablo's fifth loan payment, we first need to understand how much interest he pays in that month. The interest for any month is calculated based on the remaining balance of the loan. Initially, Pablo borrows $5,000 at a 10% annual interest rate, with monthly payments of $230.72.1. Calculate monthly interest rate: $10\% \div 12 = 0.833\%$.2. For the first payment, the interest portion is $0.833\% \times \$5,000 = \$41.67$, so the principal portion is $ \$230.72 - \$41.67 = \$189.05$. After the first payment, the remaining balance is $ \$5,000 - \$189.05 = \$4,810.95$.3. Repeat the calculation for each subsequent month to find the remaining balance just before the fifth payment.4. By the time of the fifth payment, calculate the interest based on the remaining balance from step 3, then subtract this interest from the total monthly payment of $230.72 to find the principal portion of the fifth payment.Following through the calculations for each month, you'll find that the principal portion of the fifth payment increases as the remaining balance decreases, leading to less interest being charged each month and more of the payment going towards the principal. The correct calculation shows that option D, $195.43, is the principal portion of the fifth payment.

On January 1, Pablo Borrows $5,000 with a Fixed Interest