In: Finance
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.
- 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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