Question

Jamie and Eddie are buying an apartment for $320,000.00. Their loan officer tells them that their principal will decrease by 4.5% every year if they make the minimum mortgage payments. Complete the table to predict the principal for the first 3 years. (Round to the nearest hundredth, if applicable.) This table shows the principal amount over the years with missing values to be filled in.(2 points)

Year Principal
Principal in Three Years
0 $320,000.00
1 $ [?]
2 $ [?]
3 $ [?]

Answer 1

Each year the principal is multiplied by 0.955 (1 − 0.045).

Year 0: $320,000.00
Year 1: 320,000 × 0.955 = $305,600.00
Year 2: 305,600 × 0.955 = $291,848.00
Year 3: 291,848 × 0.955 = $278,714.84

(Alternatively Pn = 320,000 × 0.955^n.)