A $33,950 loan at 10.6% compounded semi-annually is to be paid off by a series of $4,000 payments that will be made at the end of every six months. How much of the first payment will be credited towards reduction of the principal?

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Quizplus · Accepted Answer

The interest for the first six months is calculated on the initial loan amount. Interest = Principal × Rate × Time = $33,950 × 10.6% × 0.5 = $1,799. The first payment of $4,000 will cover this interest, leaving $4,000 - $1,799 = $2,201 to be credited towards the principal reduction.

A $33,950 Loan at 10