Question

Hank purchased a car for $27,500 two years ago using a 5-year loan with an interest rate of 9.0 percent. He has decided that he would sell the car now, if he could get a price that would pay off the balance of his loan. What’s the minimum price Hank would need to receive for his car? Calculate his monthly payments, then use those payments and the remaining time left to compute the present value (called balance) of the remaining loan. (Do not round intermediate calculations and round your final answer to 2 decimal places.)

Answer 1

Answer:

Monthly payments:

Loan amount = $27,500

Loan tenure = 5 years = 5 * 12 = 60 months

Monthly Interest rate = 9%/12 = 0.75%

Monthly Payment =

PMT (rate, nper, pv, fv, type)

= PMT (0.75%, 60, -27500, 0, 0)

= $570.8547687

Loan was taken two years ago.

Remaining monthly payments = 36

Current outstanding balance = Present value of remaining monthly payments

= PV (0.75%, 36, -570.8547687, 0, 0)

= $17951.56

Minimum price Hank would need to receive for his car = $17951.56