Problema Solution
You decide to take out a $20000 simple interest loan at 4%, on November 27th.
a) In 45 days you decide to pay off $8000 of the loan. What is your new principal? Explain how you got the answer.
b) 30 days after the first payment, you pay another $6000. What is your new principal? Explain how you got the answer you did.
c) 45 days after the 2nd payment, your loan comes due. How much do you need to pay then? Explain your reasoning.
Answer provided by our tutors
P =$20,000
R = 4% or 0.04
a) T = 45 days = 45/360 years and Total paid = $8,000
Procedure for payment on day 45:
Step1. Calculate Interest
I = PRT = 20,000.00 × 0.04 × (45/365) = $98.63
Step2. The remainder of the payment is principal: Principal = Total paid - Interest portion
Principal = $8,000.00 - $98.63 = $7,901.37
Step 3 New balance = Previous balance - Principal portion of payment
Balance = $20,000.00 - $7,901.37 = $12,098.63
the new principal is the previous balance thus the new principal is $12,098.63.