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In: Finance

You have just taken out a $19,000 car loan with a 7% ​APR,compounded monthly. The...

You have just taken out a $19,000 car loan with a 7% APR, compounded monthly. The loan is for five years. When you make your first payment in one month, how much of the payment will go toward the principal of the loan and how much will go toward interest?  (Note: Be careful not to round any intermediate steps less than six decimal places.)

Solutions

Expert Solution

Information provided:

Present value= $19,000

Time= 5 years*12 = 60 months

Monthly interest rate= 7%/12 = 0.5833%

The question is solved by first calculating the future value.

Enter the below in a financial calculator to compute the future value of ordinary annuity:

PV= -19,000

N= 60

I/Y= 0.5833

Press the CPT key and FV to compute the future value.

The value obtained is 26,934.88.

Therefore, the loan will be worth $26,934.88 in 19 years.

Interest payment = $26,934.88 - $19,000

= $7,934.88.

jeff jeffy answered 2 years ago
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