You have just taken out an installment loan for $100,000. Assume that the loan will be repaid in 12 equal monthly installments of $9,456 and that the first payment will be due one month from today. How much of your third monthly payment will go toward the repayment of principal? Show work for credit

The answer is: $7,757.22 of the third month's payment will go toward the repayment of principal

Explanation:

Using the information given;

loan principal $100,000 12 monthly payments of $9,456

We must first determine the APR, using an excel spreadsheet function:

=RATE (nper, pmt, pv) = RATE (12,-9456,100000) = 2% per month

Then we make an amortization table.

M Beginning bce. scheduled pmt principal interest ending bce

1 $100,000 $9,456 $7,456 $2,000 $92,544

2 $92,544 $9,456 $7,605.12 $1,850.88 $84,938.88

3 $84,938.88 $9,456 $7,757.22 $1,698.78 $77,181.66