Question

You have borrowed a loan of $20,000 from a bank to buy a car from Chase at the interest rate of

7.5% each year. You have promised the Chase to make mortgage style payments.

16. If you want to borrow this loan for three years, what is the total payment in each year?

            A) $6,191

             B) $1,500

             C) $ 7,691

             D) $ 7,154

             E) None of the above

17. If you want to borrow this loan for three years, what is the principal payment in year one?

            A) $6,191

             B) $1,500

             C) $ 7,691

             D) $ 7,154

             E) None of the above

18. If you want to borrow this loan for three years, what is the principal payment in year two?

            A) $6,191

             B) $1,500

             C) $ 7,691

             D) $ 7,154

             E) None of the above

19. If you want to borrow this loan for three years, what is the principal payment in year three?

            A) $6,191

             B) $1,500

             C) $ 7,691

             D) $ 7,154

             E) None of the above

20. If you want to borrow this loan for three years, what is the interest payment in year one?

            A) $6,191

             B) $1,500

             C) $ 7,691

             D) $ 7,154

             E) None of the above

21. If you want to borrow this loan for one year, what is the total payment?

            A) $21,500

             B) $20,000

             C) $1,500

             D) $7,691

             E) None of the above

22. If you want to borrow this loan for one year, what is the principal payment in this year?

            A) $21,500

             B) $20,000

             C) $1,500

             D) $7,691

             E) None of the above

23. If you want to borrow this loan for one year, what is the interest payment in this year?

            A) $21,500

             B) $20,000

             C) $1,500

             D) $7,691

             E) None of the above

24. If you want to borrow this loan for one year, what is the beginning balance in this year?

            A) $21,500

             B) $20,000

             C) $1,500

             D) $7,691

             E) None of the above

25. If you want to borrow this loan for one year, what is the ending balance in this year?

            A) $21,500

             B) $20,000

             C) $1,500

             D) $7,691

             E) None of the above

Answer 1

Ans1.) Option C is correct i.e. payment of $7691 is the answer.

Ans2.)Principal payment in year 1 = $6191 i.e. option A

Ans3) Option E, ie. none of above as principal payment in year 2 is 6655 approx (7690.75-1035.69)

Ans4.) Option D is correct i.e. 7154.

Ans5) Option B is correct i.e 1500

Ans.6) Option A is answer i.e total payment to be made if loan is taken for 1 year will be 20000+1500= $21500

Ans7 )Option B is correct i.e principal amount of payment is $20000

Ans8 )Option C is correct option as interest will be $1500.

Ans9) Option B will be correct as beginning balance would be $20000

Ans 10) Option E is correct i.e none of above as loan would be for 1 year wich will be paid and hence ending balance would be nil.

Particulars	Amount ( in $ )
Loan amount	20,000.00
Rate of interest	7.50%
Period of loan	3 Years
PVAF (7.5%,3years )	2.6005
Annual installment	Principal amount/PVAF(7.5%,3 years)
	7690.75
Payment schedule
Principal amount	Interest	Installmet	Balance amount
20000	1500	7690.75	13809.25
13809.25	1035.693558	7690.75	7154.19
7154.19	536.5641323	7690.7526	0.00

Particulars	Amount ( in $ )
Loan amount	20000
Rate of interest	0.075
Period of loan	3 Years
PVAF (7.5%,3years )	=+E6+E7+E8
Annual installment	Principal amount/PVAF(7.5%,3 years)
	=+B2/B6
Payment schedule
Principal amount	Interest	Installmet	Balance amount
20000	=7.5%*A14	=+B9	=+A14+B14-C14
=+D14	=7.5%*A15	7690.75256335848	=+A15+B15-C15
=+D15	=7.5%*A16	7690.75256335848	=+A16+B16-C16