Question

Taylor has a 25-year fixed rate loan for $295,500 at 6% interest. If his monthly payments are $1,903.91, how much will the principal balance be after his second payment?

Answer 1

Answer:

remaining balance after second payment is  $294645.05

Step-by-step explanation:

Given data

loan amount = $295500

rate (r) = 6 %  = 6/12 = 0.5% = 0.005 monthly

monthly payment = $1903.91

time period = 25 years

to find out

balance be after his second payment

solution

first we calculate interest after 1st month is

interest after 1st month = loan amount × rate

interest after 1st month = 295500 × 0.005

interest after 1st month = $1477.50

so principal amount will be i.e. monthly payment - interest

principal amount = monthly payment - interest

principal amount = 1903.91- 1477.50

principal amount is  $426.41

and the remaining balance is i.e. loan amount - principal

remaining balance = loan amount - principal

remaining balance = 295500 - 426.41

remaining balance is  $295073.59

now same we calculate interest after 2nd month is

interest after 2nd month = loan amount × rate

interest after 2nd month = 295073.59 × 0.005

interest after 2nd month = $1475.37

so principal amount will be i.e. monthly payment - interest

principal amount = monthly payment - interest

principal amount = 1903.91- 1475.37

principal amount is  $428.54

and the remaining balance is i.e. loan amount - principal

remaining balance = loan amount - principal

remaining balance = 295073.59 - 428.54

remaining balance is  $294645.05