Comly Communications issues a $600,000, 10%, 20-year mortgage note on January 1. The terms provide for annual installment payments of $69,932, exclusive of real estate taxes and insurance. After the first installment payment, the principal balance is:

a. 530,068.
b. $600,000.
c. $590,068.
d. $565,034

The correct answer is C

Explanation:

The amount would be:

Amount = Issued Amount × Interest rate

= $600,000 × 10%

= $60,000

So, the interest would be $60,000, this amount to be paid on year end.

But the installment payment is of $69,932

Balance amount = $69,932 - $60,000

= $9,932

The first installment is of amount $60,000. So, the principal balance would be:

Principal balance = Amount - Balance amount

= $600,000 - $9,932

= $590,068

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