Paris Company buys a building on a plot of land for $100 000, paying $20 000 cash and signing a 20- year mortgage payable for $80 000 at 6%. Monthly payments are $570. What portion of the first monthly payment is principal?
A)$170
B)$4 800
C)$570
D)$200

Question

Quizplus · Accepted Answer

The first monthly payment of $570 includes both interest and principal. The interest for the first month is calculated on the $80,000 mortgage at 6% annual interest, which is $400 ($80,000 * 6% / 12). Therefore, the principal portion is $570 - $400 = $170.

Paris Company Buys a Building on a Plot of Land