Question
In: Accounting
Cash flows are end-of-period unless otherwise specified. You are looking to purchase a new car with...
Cash flows are end-of-period unless otherwise specified.
You are looking to purchase a new car with the assistance of a $22,000, five-year loan at an APR of
5.4%, compounded monthly.
Required:
-
What is the monthly payment on this loan?
-
What is the amount of interest and principal on the loan’s first monthly payment?
-
What is the amount of interest and principal on the loan’s sixteenth monthly payment?
-
Show a second method to determine the amount of interest and principal on the loan’s sixteenth monthly payment.
-
How many months would it take to pay this loan down to $8,000?
-
What is the total amount of interest and principal that you would pay over five years?
Solutions
Expert Solution
Ans:
Loan Amount : $22,000
Time : 5 Years
Periods : 60 Months
Interest Rate : 5.4%
Monthly Payment Using Excel Function :
| Loan | $ 22,000.00 | |
| Interest | 5.4%/12 | 0.45% |
| Period | 5 Years into months | 60 |
| Monthly Payment | pmt(rate,period,Loan) | $ 419.21 |
a. Monthly payment of loan : $419.21
b. First Month Principal : $320.21 and First month Interest : $99.00
c. Sixteeth Month Principal : 417.39 and Sixtith month interest : $1.88
d. To take this loan to down to $8,000 : 40 Months.
e. Total principal payment : $22,000 and Total Interest : $3,152.66
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Amortisation Table:
| Month | Opening Balance | Interest @0.45% | Installment | Closing balance |
| 1 | $ 22,000.00 | $ 99.00 | $ 419.21 | $ 21,679.79 |
| 2 | $ 21,679.79 | $ 97.56 | $ 419.21 | $ 21,358.14 |
| 3 | $ 21,358.14 | $ 96.11 | $ 419.21 | $ 21,035.04 |
| 4 | $ 21,035.04 | $ 94.66 | $ 419.21 | $ 20,710.49 |
| 5 | $ 20,710.49 | $ 93.20 | $ 419.21 | $ 20,384.48 |
| 6 | $ 20,384.48 | $ 91.73 | $ 419.21 | $ 20,057.00 |
| 7 | $ 20,057.00 | $ 90.26 | $ 419.21 | $ 19,728.04 |
| 8 | $ 19,728.04 | $ 88.78 | $ 419.21 | $ 19,397.61 |
| 9 | $ 19,397.61 | $ 87.29 | $ 419.21 | $ 19,065.69 |
| 10 | $ 19,065.69 | $ 85.80 | $ 419.21 | $ 18,732.27 |
| 11 | $ 18,732.27 | $ 84.30 | $ 419.21 | $ 18,397.36 |
| 12 | $ 18,397.36 | $ 82.79 | $ 419.21 | $ 18,060.94 |
| 13 | $ 18,060.94 | $ 81.27 | $ 419.21 | $ 17,723.00 |
| 14 | $ 17,723.00 | $ 79.75 | $ 419.21 | $ 17,383.54 |
| 15 | $ 17,383.54 | $ 78.23 | $ 419.21 | $ 17,042.56 |
| 16 | $ 17,042.56 | $ 76.69 | $ 419.21 | $ 16,700.04 |
| 17 | $ 16,700.04 | $ 75.15 | $ 419.21 | $ 16,355.98 |
| 18 | $ 16,355.98 | $ 73.60 | $ 419.21 | $ 16,010.37 |
| 19 | $ 16,010.37 | $ 72.05 | $ 419.21 | $ 15,663.21 |
| 20 | $ 15,663.21 | $ 70.48 | $ 419.21 | $ 15,314.48 |
| 21 | $ 15,314.48 | $ 68.92 | $ 419.21 | $ 14,964.19 |
| 22 | $ 14,964.19 | $ 67.34 | $ 419.21 | $ 14,612.32 |
| 23 | $ 14,612.32 | $ 65.76 | $ 419.21 | $ 14,258.86 |
| 24 | $ 14,258.86 | $ 64.16 | $ 419.21 | $ 13,903.82 |
| 25 | $ 13,903.82 | $ 62.57 | $ 419.21 | $ 13,547.18 |
| 26 | $ 13,547.18 | $ 60.96 | $ 419.21 | $ 13,188.93 |
| 27 | $ 13,188.93 | $ 59.35 | $ 419.21 | $ 12,829.07 |
| 28 | $ 12,829.07 | $ 57.73 | $ 419.21 | $ 12,467.59 |
| 29 | $ 12,467.59 | $ 56.10 | $ 419.21 | $ 12,104.48 |
| 30 | $ 12,104.48 | $ 54.47 | $ 419.21 | $ 11,739.74 |
| 31 | $ 11,739.74 | $ 52.83 | $ 419.21 | $ 11,373.36 |
| 32 | $ 11,373.36 | $ 51.18 | $ 419.21 | $ 11,005.33 |
| 33 | $ 11,005.33 | $ 49.52 | $ 419.21 | $ 10,635.65 |
| 34 | $ 10,635.65 | $ 47.86 | $ 419.21 | $ 10,264.30 |
| 35 | $ 10,264.30 | $ 46.19 | $ 419.21 | $ 9,891.28 |
| 36 | $ 9,891.28 | $ 44.51 | $ 419.21 | $ 9,516.58 |
| 37 | $ 9,516.58 | $ 42.82 | $ 419.21 | $ 9,140.19 |
| 38 | $ 9,140.19 | $ 41.13 | $ 419.21 | $ 8,762.11 |
| 39 | $ 8,762.11 | $ 39.43 | $ 419.21 | $ 8,382.33 |
| 40 | $ 8,382.33 | $ 37.72 | $ 419.21 | $ 8,000.84 |
| 41 | $ 8,000.84 | $ 36.00 | $ 419.21 | $ 7,617.64 |
| 42 | $ 7,617.64 | $ 34.28 | $ 419.21 | $ 7,232.71 |
| 43 | $ 7,232.71 | $ 32.55 | $ 419.21 | $ 6,846.04 |
| 44 | $ 6,846.04 | $ 30.81 | $ 419.21 | $ 6,457.64 |
| 45 |
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