Problema Solution
You decide to take out a $20000 simple interest loan at 4%, on 03-19-2014. 45 days you decide to pay off $8000 of the loan. What is your new principal?
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.