Question

A) You just purchased a new car and had to borrow $25,000. According to the financing arrangement, you must repay the loan via 5 years of monthly payments at a nominal rate of 7%. How much the 3rd payment consists of how much interest?

Answer 1

rate positively ..

we have to first compute the monthly installment
put in calculator
FV		0
PV		-25,000
I	7%/12	0.5833%
N	5*12	60
compute PMT		$495.03
Now we have to prepare the amortization table for 3 month
Period	Beginning value	Interest	Installment	Principal	Closing value
1	$ 25,000.00	$ 145.83	$ 495.03	$        349.20	$ 24,650.80
2	$ 24,650.80	$ 143.80	$ 495.03	$        351.23	$ 24,299.57
3	$ 24,299.57	$ 141.75	$ 495.03	$        353.28	$ 23,946.29
Interest of 3rd payment =	$ 141.75
ans =		$ 141.75