Tracy Finely obtained a loan of $2,500 to buy a computer and a printer. The interest rate is 8.5% and the monthly payment over 24 months is $113.64. How much of the first monthly payment covered principal?

I have to use the formula I=PRT

I plugged in the numbers : I=$2,500x8.5%x24

But my answer isn't right. Even after I subtracted.

Question

Tracy Finely obtained a loan of $2,500 to buy a computer and a printer. The interest rate is 8.5% and the monthly payment over 24 months is $113.64. How much of the first monthly payment covered principal?

I have to use the formula I=PRT

I plugged in the numbers : I=$2,500x8.5%x24

But my answer isn't right. Even after I subtracted.

wolf1728 · Answer

I calculate $17.71
is that right?

anonymous · Answer

How did you get $17.71? 

Once I subtract it from $113.64-$17.71=$95.93. Which I think is the answer.

wolf1728 · Answer

That is the interest rate amount
the principal is $95.93 right??
I guess it is!!!

anonymous · Answer

But each time I plugged in my number I never got the $17.71. I want to know how you got it before I go.

wolf1728 · Answer

Okay for one thing I have a website (all free) that explains these things (and loans and mortgages are a real pain) I'll explain it

anonymous · Answer

Okay, cool thank you!

wolf1728 · Answer

First of all were you required to calculate the monthly payment ?

anonymous · Answer

Ahhh!!! I didn't put the 2/24 before multiplying it out. Which is how you got your answer!

anonymous · Answer

I thought it was 1/24 or 1/12

wolf1728 · Answer

Anyway, my month by month loan calculator is located here: http://www.1728.org/mortmnts.htm

anonymous · Answer

Thank you for your help and for the website I'm sure it will come into use with my homework!

wolf1728 · Answer

Notice that the amount going to interest and the amount paying principal changes every MONTH.

anonymous · Answer

I'll make note of it!

wolf1728 · Answer

Do you need to see how to find the first interest payment and principal?

anonymous · Answer

I don't think so, I think I've got it. If I need help again do you mind if I tag you?

wolf1728 · Answer

You may go right ahead and do so.
(As I said loans, mortgages, credit cards are VERY difficult aren't they?)

anonymous · Answer

Yess they are! Ugh haha!

wolf1728 · Answer

Okay, well good luck with those problems.  :-)

anonymous · Answer

Thank you :). Have a good morning!

wolf1728 · Answer

You too

wolf1728 · Answer

Anyway, to see what goes to interest and what goes to equity, here's a good explanation: http://www.1728.org/loanmath.htm Anyway we must convert 8.5 % to a MONTHLY payment .085 / 12 = 0.0070833333 Interest Paid = 2,500 * 0.0070833333 = 17.71 Equity = Monthly Payment -17.71 = 95.93 New Balance = Previous Balance - Equity New Balance = 2,500 -95.93 = 2,404.07