Answer:
option (B) $4,725.89
Explanation:
Given:
Annual payment = $12,600.47
Principal amount = $72,000
Interest rate = 8.15% = 0.815
Now,
Principal amount paid = Annual payment - Interest paid
and,
Interest paid = Principle × interest rate
Balance = Principal amount - principal paid
Thus,
For year 1
Interest paid = 72000 × 0.815 = $5,868
Principal amount paid = $12600.47 - $5,868 = $6732.46
Principal remaining = $72,000 - $6732.46 = $65257.53
For year 2
Interest paid = principal remaining × Interest rate
Interest paid = $65257.53 × 0.815 = $5319.30
Principal amount paid = $12600.47 - $5319.30 = $7281.17
Principal remaining = $72,000 - $7281.17 = $57986.36
For year 3
Interest paid = principal remaining × Interest rate
Interest paid = $57986.36 × 0.815 = $4725.89
Year Annual payment interest paid principal paid Balance
1 $12600.47 $5,868 $6732.46 $65257.53
2 $12600.47 $5319.30 $7281.17 $57986.36
3 $12,600.47 $4725.89
Hence,
the correct answer is option (B) $4,725.89
