Mr. Fulano de Tal Perencejo paid an early $ 2000 for the purchase of a car....

Mr. Fulano de Tal Perencejo paid an early $ 2000 for the purchase of a car. Then he paid $ 200 per month for 36 months at 12% interest per year compounded monthly to pay off the rest of the cost of the car. (Value 6 points)

What was the original cost of the car?

What proportion of the payments are interest charges?

Solutions

Expert Solution

Rat per month =12%/12 =1%
Number of months =36
Monthly Payment =200
Original Cost of the car =Early Payment + PMT*((1-(1+r)^-n)/r) =2000+200*((1-(1+1%)^-36)/1%)=8021.5010 or 8021.50

Loan Amount =8021.5010-2000 =6021.5010
Interest =Number of Payments*Number of Months -PV of loan =36*200 -6021.5010=1178.50
Interest charges as proportion of Payments =2278.50/(36*200) =31.65%

jeff jeffy answered 2 years ago

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