Question

A commercial bank will loan you $17,500 for two years to buy a car. The loan must be repaid in 24 equal monthly payments. The annual interest rate on the loan is 6% of the unpaid balance. What is the amount of the monthly payments? and what is the loan balance after 18 months?

Answer 1

Ans Monthly Payments = $ 775.61

Loan balance after 18 months = $ 4573.30

		P =	Regular Payments
		PV =	Loan Amount
		r =	rate of interest
		n =	no of periods
		P =	r (PV)
			1 - (1 + r )-n
		P =	(6%/12)*17500
			1 - (1 / (1 + 6%/12)^24))
		P =	87.5
			0.112814331
		P =	$ 775.61
	Beginning Balance	Interest	Principal	Ending Balance
1	$17,500.00	$87.50	$688.11	$16,811.89
2	$16,811.89	$84.06	$691.55	$16,120.34
3	$16,120.34	$80.60	$695.01	$15,425.33
4	$15,425.33	$77.13	$698.48	$14,726.85
5	$14,726.85	$73.63	$701.98	$14,024.87
6	$14,024.87	$70.12	$705.49	$13,319.38
7	$13,319.38	$66.60	$709.01	$12,610.37
8	$12,610.37	$63.05	$712.56	$11,897.81
9	$11,897.81	$59.49	$716.12	$11,181.69
10	$11,181.69	$55.91	$719.70	$10,461.99
11	$10,461.99	$52.31	$723.30	$9,738.69
12	$9,738.69	$48.69	$726.92	$9,011.77
Year #1 End
13	$9,011.77	$45.06	$730.55	$8,281.22
14	$8,281.22	$41.41	$734.20	$7,547.01
15	$7,547.01	$37.74	$737.88	$6,809.14
16	$6,809.14	$34.05	$741.57	$6,067.57
17	$6,067.57	$30.34	$745.27	$5,322.30
18	$5,322.30	$26.61	$749.00	$4,573.30