Answer:
Amount of the payment to be applied to the principal is $714.43
Explanation:
When a loan is to be paid over a period of time using a series of periodic equal installments, it is called loan amortization. Each equal installment is meant to liquidate the principal and the accrued interest.
The monthly equal installment is calculated as follows:
Monthly equal installment-= Loan amount/Monthly annuity factor
<em>Monthly annuity factor </em>
=( 1-(1+r)^(-n))/r
<em>Monthly interest rate (r)</em>
= 5.25/12= 0.4375%,
<em>Number of months </em>
= 15* 12 =180
<em>Annuity factor</em>
= ( 1- (1.004375)^(15×12)0/0.004375
=124.39
<em>Monthly installment</em>
= 195,000/124.39
=1567.561
<em>Interest due in first month</em>
= 0.4375% × 195,000
= 853.125
Amount of the payment to be applied to the principal
= 1,567.561 -853.125
=$714.43
