Question

On September 1, 2014, Susan Chao bought a motorcycle for $21,000. She paid $1,100 down and financed the balance with a five-year loan at an APR of 6.3 percent compounded monthly. She started the monthly payments exactly one month after the purchase (i.e., October 1, 2014). Two years later, at the end of October 2016, Susan got a new job and decided to pay off the loan.
  
If the bank charges her a 2 percent prepayment penalty based on the loan balance, how much must she pay the bank on November 1, 2016? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Answer 1

Amount borrwed (21000-1100)				19900
Annual rate of interest = 6.3%
Monthle rate = 6.3 /12 = 0.525%
Divide: Annuity PVF at 0.525% for 60 months				51.3542
Monthly payment				387.5
Principal outstanding after 2 yrs i.e. on Oct012016					12680.78
		(387.50* 32.7246)
Add: Interest for one month till Nov 01 2016					66.57
		(12680.78*0.525%)
Sub-total					12747.35
Add: Prepayment penalty @ 2%					254.95
Amount to be paid					13002.3