Question

In: Finance

You purchase a boat for $35,000 and pay $5,000 down. You also agree to pay the...

You purchase a boat for $35,000 and pay $5,000 down. You also agree to pay the rest over the next 10 years in 10 equal end of the year payments plus 13 percent compound interest on the unpaid balance.

What will be the amount of each payment?

-monthly rate?

-number of payments?

-down payment?

-total loan amount?

Please show work in excel

Expert Solution

The answers can be calculated using PMT formula in excel or using the formula of Equated Annual Installment-

Loan Amount	$ 30000
Loan Term (Years)	10
Payments Per Year	1
Rate of Interest	13.00%

USING PMT FORMULA

Annual Installment

$ 5528.69

=PMT(F9/F8, F7*F8, -F6)

USING EQUATED ANNUAL INSTALLMENT FORMULA

P = (r * A ) / ( 1 - (1+r)^-n)

=(13%*30000)/(1-(1+13%)^^-10)

= $ 5528.69

Q 1 What will be the amount of each payment?

Answer: $ 5,528.69

Q 2 monthly rate?

Answer: The annual interest compounded annually is 13%. So, the monthly interest rate can be 1.0833%

Q 3 number of payments?

Answer: 10 payments at every year-end

Q 4 down payment?

Answer: $ 5,000

Q 5 total loan amount?

Answer: $ 30,000

Note: The above calculation was done in excel but since the file can't be uploaded here the values along with formulas have been posted here.

jeff jeffy answered 7 months ago

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