Question

Assume that you borrow $36,000 for six years at an interest rate of 3.6% per year. If the loan has monthly payments, what is the amount of principal in the first payment? Question 5 options: A) $448.69 B) $556.69 C) $462.59 D) $477.86 E) $522.86

Answer 1

Option a. 448.69 is correct:

Monthly payment	=	[P * R * (1+R)^N ] / [(1+R)^N -1]
Using the formula:
Principle	P	36,000.00
Rate of interest per period:
Annual rate of interest		3.600%
Frequency of payment	=	Once in 1 month period
Numer of payments in a year	=	12/1 =	12
Rate of interest per period	R	0.036 /12 =	0.3000%
Total number of payments:
Frequency of payment	=	Once in 1 month period
Number of years of loan repayment	=	6
Total number of payments	N	6*12 =	72
Period payment using the formula	=	[ 36000*0.003*(1+0.003)^72] / [(1+0.003 ^72 -1]
Monthly payment	=	556.69

Period	Opening liability	Interest expense	EMI Payment	Principle repaid	Closing liability
N	A	B= A* 0.0030	C	D=C-B	E=A-D
1	36,000.00	108.00	556.69	448.69	35,551.31

principle portion = 448.69