Question

In: Finance

In December 2019, Dayanara bought a new BMW 328i car for $ 70,000 paying $ 8,000...

In December 2019, Dayanara bought a new BMW 328i car for $ 70,000 paying $ 8,000 suddenly. This agreed with Bank XYZ to pay the balance making equal annual payments in 6 years, at 9% interest.

a. Determine the amount of the annual payment that will pay off the debt.

b. Make the amortization table.

Please show process.

Solutions

Expert Solution

- Loan amount = Price of car - down payment

Loan amount = $70,000 - $8,000

Loan amount = 62,000

a). Calculating the Annual Equal Payments:-

Where, P = Loan amount = $62,000

r = Periodic Interest rate = 9%

n= no of periods = 6 years

Annual Payments = $13,821.03

b). Constructing the amortization table:-

Year Beg bal. Payment Interest amount Principal Amount End Bal.
1 62,000.00            13,821.03                     5,580.00                           8,241.03               53,758.97
2                53,758.97            13,821.03                     4,838.31                           8,982.72               44,776.25
3                44,776.25            13,821.03                     4,029.86                           9,791.17               34,985.08
4                34,985.08            13,821.03                     3,148.66                        10,672.37               24,312.71
5                24,312.71            13,821.03                     2,188.14                        11,632.89               12,679.82
6                12,679.82            13,821.03                     1,141.18                        12,679.85                        (0.03)

Note- The following Columns are calculated based on:

- Interest amount = beg. Balance*Monthly interest rate

- Principal Amount = Payment - Interest amount

- End Bal. = Beg. Bal + Interest - Payment

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