John Doeber borrowed $150,000 to buy a house. His loan cost was 6% and he promised to repay the loan in 15 equal annual payments. What is the principal outstanding after the first loan payment?

Question

Quizplus · Accepted Answer

The correct answer is A because the principal outstanding after the first loan payment is $143,555. This is because the first loan payment is $11,250, which is calculated as follows: $150,000 x 6% = $9,000 (interest) + $150,000 / 15 = $10,000 (principal) = $11,250. The principal outstanding after the first loan payment is $150,000 - $11,250 = $143,555.

John Doeber Borrowed $150,000 to Buy a House