Question

Derek borrows $32,448.00 to buy a car. He will make monthly payments for 6 years. The car loan has an interest rate of 6.47%. After a 16.00 months Derek decides to pay off his car loan. How much must he give the bank?

Answer 1

Information provided:

Present value= $32,448

Time= 6 years*12= 72 months

Interest rate= 6.47%/12= 0.5392% per month

The question is solved by first computing he monthly payment.

The monthly payment is calculated by entering the below in a financial calculator:

PV= -32,448

N= 72

I/Y= 0.5392

Press the CPT key and PMT to compute the monthly payment.

The value obtained is 544.99.

Therefore, the monthly payment is $544.99.

The amount to be paid to the bank:

= $32,448 - (16*$544.99)

= $32,448 - $8,719.84

= $23,728.16.

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