On January 1, Year 1, Mahoney Company borrowed $174,000 cash from Sun Bank by issuing a 5-year, 8% term note. The principal and interest are repaid by making annual payments beginning on December 31, Year 1. The annual payment on the loan equals $40,875. What is the amount of principal repayment included in the payment made on December 31, Year 1? Multiple Choice

a $13,920

b $26,955

c $37,605

d $40,875