Rush Corporation borrowed $50,000 on January 1, 2014. The loan is for a five-year period and has an annual interest rate of 8%. At the end of each year, Rush will make a payment of $12,522.82, which includes both principal and interest. The amount of the payment for 2012 that is reduction of principal is $8,502.82.

Question

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The loan was borrowed in 2014, so there would be no payment in 2012. The payment schedule starts from 2014, and the principal reduction amount would be calculated based on the interest and principal for that specific year.

Rush Corporation Borrowed $50,000 on January 1, 2014