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Kerri James is considering the purchase of a car. She wants to buy the new VW...

Kerri James is considering the purchase of a car. She wants to buy the new VW Beetle, which will cost her $17,600. She will finance 90% of the purchase price (i.e., make a 10% down payment) at an interest rate of 5.9 percent, with monthly payments over three years. How much money will she still owe on the loan at the end of one year(that is, immediately after she makes the 12th payment on her car loan)?

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Homework Answers

Answer #1

Computation of Monthly Payment

Monthly Payment = Loan Amount / PVAF ( 0.49%,36)

Monthly Payment = 17600 * 0.90 / 32.92

Monthly Payment = $481.17

Cumulative Interest paid till the 12th payment = "=CUMIPMT(0.49%,36,15840,1,12,0)" --Excel Funtion

Cumulative Interest paid till the 12th payment = $801.52

Total payments Made in Year 1 = Monthly Payment * 12 = 481.17 * 12 = $5774.04

Total Principal repaid in year 1 = $5774.04 - 801.52 = $4972.52

Loan Still Owe after one year = Loan Amount - Principal Repaid

Loan Still Owe after one year = 17600 * .90 - 4972.52

Loan Still Owe after one year = $10867.49

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