Question

You buy a $110,000 RV on a 7.1%, 8-year loan.   A. How much are your monthly...

You buy a $110,000 RV on a 7.1%, 8-year loan.  

A. How much are your monthly payments?

B. How much will go toward principal in the 14th month?

C. How much will go toward interest in the 14th month?

D. How much interest, in total, will you pay over the life of the loan?

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Homework Answers

Answer #1

a.

Calculating Monthly Payment,

Using TVM Calculation

PMT = [PV = 110,000, FV = 0, N = 96, I = 0.071/12]

PMT = $1,505.19

b.

Calculating Balance at the end of 13th month,

Using TVM Calculation,

FV = [PV = 110,000, PMT = -1,505.19, N = 13, I = 0.071/12]

FV = $98,490.40

Interest on 14th payment = (0.071/12)(98,490.40) = $582.73

Principal in 14th payment = 1,505.19 - 582.73

Principal in 14h payment = $922.46

Total Interest Paid = 96(1,505.19) - 110,000

Total Interest Paid = $34,498.24

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