Question

Use an Excel worksheet to answer the following five car loan problems

you borrowed money from your local bank to purchase a car. The bank requires you to repay the loan over 48 months and charges a fixed, annual interest rate of 6 percent. The amount of your loan is $25,000

a,How much will your loan payment be each month?

b,How much of the first loan payment will go toward principal?

c,How much interest will you pay during the 1^st year of the loan (the first 12 payments)?

d,What will your loan balance be after the 24^th payment?

e,How much will you pay in interest during the last year of the loan (payments 37-48)?

Answer 1

a.

How much will your loan payment be each month

=25000/((1-(1+(6%/12))^(-48))/(6%/12))=587.13 is answer

b.

How much of the first loan payment will go toward principal=587.13-25000*(6%/12)=462.13

c.

loan value at the end of 12 months=587.13*((1-(1+(6%/12))^(-36))/(6%/12))=19299.56

principal paid in first year=25000-19299.56=5700.44

How much interest will you pay during the 1st year of the loan (the first 12 payments)=587.13*12-5700.44=1345.12

d.

What will your loan balance be after the 24th payment=587.13*((1-(1+(6%/12))^(-24))/(6%/12))=13247.34

e.

loan value after 36 months=587.13*((1-(1+(6%/12))^(-12))/(6%/12))=6821.82

so principal paid in the last year =6821.82

How much will you pay in interest during the last year of the loan (payments 37-48)=587.13*12-6821.82=223.74

the above are answer