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he balance after 7 months, including interest, on a loan at 10
he balance after 7 months, including interest, on a loan at 10.7% is $16,042.50. What are the principal and interest components of the balance? (Do not round intermediate calculations and round your final answers to 2 decimal places.)
| Principal component | $ |
| Interest component | $ |
Expert Solution
| Answer : | |||
| $16,042.50 is the FV. We have the equality: | |||
| = PV [Principal]*(1+interest on a loan*7 months/12 months) | |||
| $16,042.50 = PV [Principal]*(1+0.107*7/12) | |||
| Soluction for PV: | |||
| PV = $16,042.50/(1+0.107*7/12)= | $ 15,100.01 | ||
| Interest = $16,042.50 -15,100.01 = | $ 942.49 | ||
| Principal Component | $ 15,100.01 | ||
| Interest Component | $ 942.49 |
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