You just took out a $12,000 loan for your small business.The loan has a four year term and repayment is in the form of four equal end-of-year payments.The interest rate on the loan is 11.5%.Consider the final loan payment.How much principal do you pay in the final payment?
A) $3,506.09
B) $2,529.29
C) $2,820.16
D) $3,144.48
E) $3,909.29

Question

Quizplus · Accepted Answer

Step 1 - Calculate the payment.
PV = PMT × 11ea7fdb_fc1f_f73b_a768_5399b829ff42_TB2902_11 PMT = PV / 11ea7fdb_fc20_1e4c_a768_8d806895304a_TB2902_11 PMT = 12,000 / 11ea7fdb_fc20_1e4d_a768_c10d1eb8f7c2_TB2902_11 = $3,909.29
Using a financial calculator:
N = 4, I = 11.5, PV = -12,000, FV = 0, cpt PMT = $3,909.29
Step 2 - Calculate how much of each payment goes toward the principal.
PV = 11ea7fdb_fc20_1e4e_a768_8f4bff1fbe43_TB2902_11 PV = 11ea7fdb_fc20_1e4f_a768_e3ae5e326c80_TB2902_11 = $2,529.29
PV = 11ea7fdb_fc20_4560_a768_33cd96f7c18a_TB2902_11 = $2,820.16
PV = 11ea7fdb_fc20_4561_a768_7539fb6b7c9e_TB2902_11 = $3,144.48
PV = 11ea7fdb_fc20_4562_a768_cdfffed2277d_TB2902_11 = $3,506.09

You Just Took Out a $12,000 Loan for Your Small