**Answer:**

**Percentage of 2nd installment = 90% **

**Explanation:**

<em>Loan Amortization: A loan repayment method structured such that a series of equal periodic installments will be paid for certain number of periods to offset both the loan principal amount and the accrued interest. </em>

The monthly installment is computed as follows:

**Monthly installment= Loan amount/annuity factor**

Loan amount =72,500

Annuity factor = (1 - (1+r)^(-n))/r

r -monthly rate of interest, n- number of months

r- 11%/12 = 0.916% = 0.0091667
, n = 1× 12 = 12

Annuity factor = ( 1- (1+0.0091667)^(-12))/0.0091667= 11.3149

Monthly installment = Loan amount /annuity factor

= $72,500 /11.3149= 6407.47

Monthly installment = $6407.47

Principal due in year : 72,500

Interest due in year 1 = 0.916%×72,500 664.59

Principal balance paid in year 1 = 6407.47- 664.59 = 5742.88

Interest due in year 2 = 0.916%× (72,500- 5742.88) = 641.53

Principal paid in year 2 = 6407.47- 641.53 =5765.93

Percentage of principal that goes into repayment of

principal = (principal paid in year 2 /monthly installment)× 100

(5765.93/6407.47) × 100 = 90%

**Percentage of 2nd installment = 90% **