Question

1) Calculate how much principal is paid in Year 1 for a loan in the original amount of $10,000, annual payments, at an interest rate of 5% per year, amortized over 5 years. A) $500 B) $1,809.75 C) $1,000 D) $519.99 2)

For the loan in #1, how much interest is paid over the life of the loan?

A) $1,548.74 B) $10,000 C) $2,309.75 D) $519.99

Answer 1

Ans 1) B) $1,809.75

Ans 2) A) $1,548.74

Interest Paid = Total Amounts paid - loan amount

                    = 2309.75 * 5 - 10000

                    = $ 1548.74