Question

The maturity value of a 180-day, 8.75% ordinary interest commercial loan is $83,500. Find the principal.

Answer 1

The appropriate formula for the loan value at maturity is
A = P(1 + rt)

Substituting the given numbers, we have
$83,500 = P(1 + .0875·180/360)
$83,500/1.04375 = P = $80,000

The principal is $80,000.