Answer:
The multiple choices are as follows:
a. $100,000
b. $92,000
c. $93,097
d. $96,903
The correct option is C,$93,097
Explanation:
The principal balance of the note on January 1 year 2 is computed by first of all adding the first year interest to principal amount of $100,000 then deducting the annual principal and interest repayment of $14,903.
Find the computation below:
Opening balance of the note in year 2=$100,000+($100,000*8%)-$14,903
=$100,000+$8,000-$14,903
=$93,097
The opening balance in year 2 is $93,097
Option A is wrong because $100,000 was initial amount of the note.hence no repayment and interest have been considered.
Option B is also incorrect because $92,000 means $100,000 minus the interest on the note,whereas the interest should have been added.
