Question

What is the balance on an amortized loan of $110,000 after the first payment if the interest rate is 5.5% with a monthly P&I payment of $568? $109,432 $109,496 $109,754 $109,936

Answer 1

The first monthly payment will be applied to interest due before any is applied to principal. The interest due is one month's interest at the 5.5% annual rate, or

... (0.055/12)·$110,000 = $504.17

The new principal balance after the first month will be

... $110,000 + 504.17 - 568.00 = $109,936.17

Rounded to the nearest dollar, the 4th selection is appropriate:

... $109,936