Question

Jacob wants to determine the principal amount still owed on his mortgage loan. He knows that the interest portion of his last monthly payment was $391.42. If he is paying interest at the rate of 11½%, what was the outstanding balance of the loan before that last payment was made?

Answer 1

If the interest rate is 11½%. The outstanding balance of the loan before that last payment was made is:$40,843.83.

Loan Oustanding balance

First step is to find the annual interest

Annual interest= $391.42 x 12

Annual interest= $4,697.04

Second step is to calculate the outstanding balance

Outstanding balance=Annual interest/Interest rate

Oustanding balance= $4,697.04/ 11½%,

Outstanding balance =$40,843.826

Outsatnding balance= $40,843.83 (Approximately)

Therefore the outstanding balance of the loan before that last payment was made is:$40,843.83.

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