Question

The maturity value of a 3-year, 7.2% ordinary interest commercial loan is $500,000. Find the principal.

The answer is $411,184

Answer 1

Answer:

$411,184.

Step-by-step explanation:

To find the principal amount for our given commercial loan we will use simple interest formula.

$A=P(1+rt)$

A= Amount after t years.

P= Principal amount.

r= Interest rate in decimal form.

t= Time  

First of all let us convert our given interest rate in decimal form.

$r=7.2%=\frac{7.2}{100} =0.072$  

Now let us substitute our given values in above formula.

$500,000=P(1+0.072\times 3)$

$500,000=P(1+0.216)$

$500,000=P(1.216)$

$P=\frac{500,000}{1.216}$

$P=411,184.2105263157894737\approx 411,184$

Therefore, the principal amount is $411,184.