Chapter 12, Problem 1EA

Campus Flights takes out a bank loan in the amount of $200,500 on March 1. The terms of the loan include a repayment of principal in ten equal installments, paid annually from March 1. The annual interest rate on the loan is 8%, recognized on December 31. (Round answers to the nearest whole dollar if needed.)

A. Compute the interest recognized as of December 31 in year 1 rounded to the whole dollar.

B. Compute the principal due in year 1.