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A company issues a $200,000, 5%, six-year note on January 1, 2021. If the monthly payment is $3,220.99, by how much will the carrying value decrease when the first month’s payment is made on January 31, 2021?a. $833.33b. $4,054.32c. $3,220.99d. $2,387.66

Respuesta :

Answer:

Option (d) is correct.

Explanation:

Given that,

Note value = $200,000

Rate of interest = 5%

Time period = 6 years

Monthly payment = $3,220.99

Interest amount in the first month:

= Note value × Rate of interest × Time period

= $200,000 × 5% × (1 ÷ 12)

= $200,000 × 0.05 × 0.0833

= $833.33

First Month's principal amount:

= Monthly payment - Interest amount

= $3,220.99 - $833.33

= $2,387.66

Carrying value will be decrease when the first month's payment is made is $2,387.66.

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