what is the initial principal amount borrowed at 5% simple annual interest if, there are 20 quarterly payments of $2,500 each, such that the total of interest and principal is $50,000?
If you mean that the interest of 5% is charged ONLY once per year and that the $2,500 quarterly payments, or $10,000 a year, are paid reguarly, then the initial loan amount can easily be computed using this formula:PV={P[1 + R]^N - 1.[1 + R]^-N} R^-1} * (1+R).
PV={10,000[1.05^5 - 1 x 1.05^-5 x .05^-1]} * 1.05=$45,459.51. This is highly unusual for a loan from a bank. A loan of this type would ordinarily charge 5% comp. quarterly and with quarterly payments of $2,500 for 20 quarters, the amount that the bank would lend you would be=$43,998.29.
You will pay $2,500 x 20=$50,000, which includes principal plus interest.
