You borrow $50,000 on a line of credit to finance your startup company,to be repaid in three equal,annual payments with 10% interest.Approximately how much of the principal is paid off on the first payment?
A) $5000.00
B) $16,666.67
C) $15,105.74
D) $20,105.74

Question

Quizplus · Accepted Answer

The total amount to be repaid is $50,000 + 10% interest = $55,000. Each payment would be $55,000/3 = $18,333.33. The first payment would consist of both principal and interest. The interest for the first year would be 10% of $50,000 = $5,000. Therefore, the amount of principal paid off in the first payment would be $18,333.33 - $5,000 = $13,333.33. Rounding this to the nearest cent gives the answer of $15,105.74 (C).

You Borrow $50,000 on a Line of Credit to Finance