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Joanna obtains a $500 loan with a nominal interest rate of 16% that is convertible quarterly. She pays a $20 installment at the end of each quarter. The fourth payment of $92.8 settled the principal.
What does a loan's principle consist of?
A principal payment is a contribution made to the loan's outstanding balance. In other terms, a principal payment is a payment made toward a loan that goes toward the principal balance owed rather than the interest owed on the loan.
How is principal repaid determined?
When you first take out a home loan, you borrow a certain amount of money, which is known as the principal. Simply deduct your down payment from the final selling price of your home to determine your mortgage principal.
In the given question,
Loan= $500
Interest rate= 16%
Installment= $20
principal repaid on the 4th installment= 20* 0.016=3.2
= 20 + 3.2
= 23.2 * 4
= $92.8
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