Question

(B-8) Angela Montery has a five-year car loan for a Jeep Wrangler at an annual interest rate of 6.9% and a monthly payment of $599.50. After 3 years, Angela decides to purchase a new car. What is the payoff on Angela's loan?

(C-9) You receive a 10-year subsidized student loan of $11,000 at an annual interest rate of 5%. What are your monthly loan payments for this loan when you graduate?

Answer 1

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B-8

Using Financial Calculator.

1. No.of periods left (N) = 60-36 = 24.

I/Y = 6.9/12

PMT = -599.50

CPT Press PV = $13,403.46

Formula: The present value of an ordinary annuity (PV)

PV = C× [1-(1+r)^-n]/r

PV = Present value (The cummulative amount available at Present)

C= Periodic cash flow.

r =effective interest rate for the period.

n = number of periods.

PV = 599.50× [1-(1+0.00575)^-24]/0.00575

PV = $13,403.46

B-9:

N= 10*12 = 120

I/Y = 5/12

PV = 11,000

CPT Press PV = -116.67

The monthly loan payment is $116.67