a) To determine the loan principal, we can divide the total amount borrowed ($25,000) by the number of payments in the loan term. In this case, since the loan is being repaid in monthly installments over 5 years, or 60 months, the loan principal would be $25,000 divided by 60, which equals $416.67.
b) The annual interest rate is given as 8%. To convert this to a decimal, divide it by 100: 8% / 100 = 0.08 (interest rate as a decimal).
c) The number of payments made in a year is determined by the frequency of the payments. In this case, you are making monthly payments, so the number of payments in a year would be 12.
d) The loan term is given as 5 years, which implies that the loan should be fully repaid within this time period.
e) The payment amount is given as $510 per month.
f) The loan requires a total of 60 payments since it is being repaid over 5 years or 60 months.
g) To find the total amount paid over the full term of the loan, multiply the monthly payment amount by the total number of payments: $510 * 60 = $30,600.
h) To determine the percentage of the total amount paid toward the principal, divide the principal payment by the total amount paid and multiply by 100: ($416.67 / $30,600) * 100 = 1.36%.
i) To find the percentage of the total amount paid for interest, you subtract the principal payment percentage from 100% since the remaining percentage is the interest paid: 100% - 1.36% = 98.64%. Therefore, approximately 98.64% of the total amount paid is for interest.