Beta Company borrowed $20,000 at 8% for 6 years. The loan requires annual payments of $4,326.31. When Beta Company makes the first annual payment:
1. how much of the first payment will be interest?
2. how much of the payment will be used to reduce the principal of the loan?
1. $1,600 = $20,000 x 0.08
2. $2,726.31 = $4,326.31 — 1,600
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