Question

Upon graduation, Jeffrey Feldhusen borrows $13,100 to finance a late model used car. The loan is made by a family member who wishes to have equal annual payments at 12 % over 4 years. Click here to access the TVM Factor Table Calculator

How much are the annual payments? $ Carry all interim calculations to 5 decimal places and then round your final answer to the nearest dollar. The tolerance is ±5.

How many total dollars of interest does Jeffrey pay over the life of the loan? $    Carry all interim calculations to 5 decimal places and then round your final answer to the nearest dollar. The tolerance is ±5.

How much of the second payment goes to pay interest? $ Carry all interim calculations to 5 decimal places and then round your final answer to the nearest dollar. The tolerance is ±5.

How much of the second payment goes to pay principal? $ Carry all interim calculations to 5 decimal places and then round your final answer to the nearest dollar. The tolerance is ±5.

Develop a table. Year Beginning Balance Loan Payment Interest Payment Principal Payment Ending Balance 1 $ $ $ $ $ 2 $ $ $ $ $ 3 $ $ $ $ $ 4 $ $ $ $ $ Carry all interim calculations to 5 decimal places and then round your final answer to the nearest dollar. The tolerance is ±5. Do your answers to Parts a, c, and d agree? NoYes

Answer 1

Using Excel (All answers are from below table)

a. Annual loan repayment = 4313

b. Total interest paid = 4152

c. Total interest paid in second payment = 1243

d. Total principal paid in second payment = 3070

e.

Total cost	13100
Down Payment	0
Amount of loan	13100
interest rate	12%
time (yrs)	4
Yearly payment	4313
Total amount paid	17252
Total interest paid	4152
Year	Beginning Balance	Yearly Payment	Yearly Interest	Principle Amount	Ending Balance
1	13100	4313	1572	2741	10359
2	10359	4313	1243	3070	7289
3	7289	4313	875	3438	3851
4	3851	4313	462	3851	0

YES, All answers agree

Showing formula in Excel

Total cost	13100
Down Payment	0
Amount of loan	=B1-B2
interest rate	0.12
time (yrs)	4
Yearly payment	=PMT(B4,B5,-B3)
Total amount paid	=B7*B5
Total interest paid	=B8-B3
Year	Beginning Balance	Yearly Payment	Yearly Interest	Principle Amount	Ending Balance
1	=B3	=$B$7	=B12*($B$4)	=C12-D12	=B12-E12
2	=F12	=$B$7	=B13*($B$4)	=C13-D13	=B13-E13
3	=F13	=$B$7	=B14*($B$4)	=C14-D14	=B14-E14
4	=F14	=$B$7	=B15*($B$4)	=C15-D15	=B15-E15