Question 1083613: A business owner takes on a $10,000 loan to cover expenses. The interest rate on the loan is 6% per year. Each year, the business owner pays $1000 toward the loan. Find the balance on the loan after the second payment is made (round your answer to the nearest cent).
A) $9,176.00
B) $8,976.05
C) $6,788.08
D) $5,442.78
Answer by jim_thompson5910(35256)   (Show Source):
You can put this solution on YOUR website!
Answer: Choice A) $9,176.00
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Work Shown:
Year 1:
interest paid = (interest rate in decimal form)*(current balance)
interest paid = (0.06)*(10000)
interest paid = 600
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principal paid = (payment amount) - (interest paid)
principal paid = (1000) - (600)
principal paid = 400
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new balance = (old balance) - (principal paid)
new balance = (10000) - (400)
new balance = 9600
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Year 2:
interest paid = (interest rate in decimal form)*(current balance)
interest paid = (0.06)*(9600)
interest paid = 576
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principal paid = (payment amount) - (interest paid)
principal paid = (1000) - (576)
principal paid = 424
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new balance = (old balance) - (principal paid)
new balance = (9600) - (424)
new balance = 9176
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Table:
| Year | Interest Paid | Principal Paid | Old Balance | New Balance |
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| 1 | $600 | $400 | $10,000 | $9,600 | | 2 | $576 | $424 | $9,600 | $9,176 |
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