Answer:
a. $21,500.00
Explanation:
Principal Payment is the amount which includes Interest Payment along with any additional amount paid with Interest Amount.
The simple way to calculate the Principal Payment is as follows;
Interest Payment = P x [tex]\frac{r}{n}[/tex]
where;
P = Loan Amount = $20,000
r = Interest Rate = 7.5% = 0.075
n = Number of periods = 1
So;
Interest Payment = $20,000 x [tex]\frac{0.075}{1}[/tex]
Interest Payment = $20,000 x 0.075
Interest Payment = $1,500
Since the loan was only for 1 year so the principal payment can be calculated as follows;
Principal Payment = Loan Amount + Interest Payment
Principal Payment = $20,000 + $1,500
Principal Payment = $21,500
Hence Option a. $21,500.00 is the correct answer.
