Question

USE THE INFORMATION BELOW TO ANSWER THE FOLLOWING THREE QUESTIONS Vito Scaletta just bought his dream car, 2021 Aston Martin DB11 V8 Shadow Edition that cost $228,700. He paid $50,000 down and financed the balance over 84 months at 5. 5% p.a. (Assume that Vito makes all required payments on time).

What is the monthly payment on Vito’s loan?

What will the balance on Vito’s loan be at the end of the third year (that is, immediately after Vito makes his 36th payment on the loan)?

What is the total amount of interest that Vito will pay over the entire term of the loan (that is, the total amount of interest that is paid on payments 1 through 84)?

Answer 1

1)The monthly payment on Vito’s loan IS=

=(228700-50000)*(5.5%/12)/(1-1/(1+5.5%/12)^84)
=2567.9266218

2)The balance on Vito’s loan be at the end of the third year (that is, immediately after Vito makes his 36th payment on the =(228700-50000)*(1+5.5%/12)^(12*3)-2567.9266218/(5.5%/12)*((1+5.5%/12)^(12*3)-1)
=110417.7050354

3)The total amount of interest that Vito will pay over the entire term of the loan (that is, the total amount of interest that is paid on payments 1 through 84) IS =

  =2567.9266218*84-(228700-50000)
=37005.8362312