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26 March, 22:01

Adventure Travel signed a 14%, 10-year note for $152,000. The company paid an installment of $2,200 for the first month. After the first payment, what is the principal balance? (Do not round any intermediate calculations, and round your final answer to the nearest dollar.)

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  1. 27 March, 01:29
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    The principal balance is $151,573

    Explanation:

    For computing the principal balance, we need the following calculation which is shown below:

    1. First we have to compute the 1 month interest payment which equals to

    = Note amount * rate * 1 month : total months in a year

    = $152,000 * 14% * 1 : 12

    = 1773.33

    2. Now deduct the first month interest from installment amount which equals to

    = Installment amount - Interest amount

    = $2,200 - $1773.33

    = $426.67

    3. Now subtract step 2 amount from notes amount which equals to

    = Notes amount - principal amount

    = $152,000 - $426.67

    = $151,573.33

    Hence, the principal balance is $151,573
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