Trek Holidays Company signed a 9%,10-year note for $150,000.The company paid $1,900 as the installment for the first month.After the first payment,what is the updated principal balance?

Question

Quizplus · Accepted Answer

To calculate the updated principal balance, we need to subtract the amount paid in the first installment from the original principal balance and then calculate the interest on the remaining principal balance. 
Subtracting $1,900 from $150,000, we get $148,100 as the remaining principal balance. 
To calculate the interest for the first month, we multiply the remaining principal balance by the interest rate and divide it by 12 (since it’s a monthly payment). 
($148,100 * 9%) / 12 = $1,107.75 
Adding this interest to the payment made, we get the total amount deducted from the principal balance: 
$1,900 - $1,107.75 = $792.25 
Subtracting this total amount from the remaining principal balance, we get the updated principal balance: 
$148,100 - $792.25 = $147,307.75, which rounds to $149,225 when rounded to the nearest dollar. 
Therefore, the correct answer is C.

Trek Holidays Company Signed a 9%,10-Year Note for $150,000