Answer:
Principal paid in the first payment =$2,656.52
Explanation:
L<em>oan Amortization: A loan repayment method structured such that a series of equal periodic installments will be paid for certain number of periods to offset both the loan principal amount and the accrued interest</em>.
We will use the following relationships:
Interest paid = Interest rate × loan balance
Principal paid = Monthly installment - Interest paid
Monthly installment = Loan amount/Annuity factor
Annuity factor = (1- (1+r)^(-n))/r
r - annual interest rate
n- number of period = 12× 5 = 60
Monthly interest rate - 8.86/12 =0.738
%
Loan amount = 13,381
Annuity factor = (1 - (1.00738)^(-60) )/ 0.00738=48.336
Monthly interest payment = Loan amount/Annuity factor
13,381/48.336=2,755.32
Interest due in the first month = interest rate × loan amount
= 0.738
%× 13,381 =98.796
Principal aid in the first year = Monthly installment - interest due 1st month
= 2,755.32 - 98.796 = 2,656.52
Principal paid in the first payment =$2,656.52
