Question

You decide to buy a new car, with a drive-out price of $37,500. You finance the car at 4.8% APR for 5 years, with end of month payments. Answer the following questions. Show your inputs for potential partial credit. Show your answer to the nearest $.01 a. What is your monthly payment? b. How much of your 25th payment is payment of principal? c. Over the entire life of the loan (assuming you pay on time), what was the total amount of interest you paid?

Answer 1

a. If APR is 4.8% that implies monthly interest = 0.4%

So we get the Monthly payment = $ 704.24

EXCEL FORMULA = pmt(0.004,60,-37500)

b. $609.97

c. $4754.42

For details of calcualtion for question b & c refer to the table below:

Note: Question c is nothing but the sum of interests of all the sixty months

Month	Interest Paid	Principal Repaid	Monthly installment	Loan Outstanding
				37,500
1	150.00	554.24	704.24	36,946
2	147.78	556.46	704.24	36,389
3	145.56	558.68	704.24	35,831
4	143.32	560.92	704.24	35,270
5	141.08	563.16	704.24	34,707
6	138.83	565.41	704.24	34,141
7	136.56	567.68	704.24	33,573
8	134.29	569.95	704.24	33,004
9	132.01	572.23	704.24	32,431
10	129.73	574.51	704.24	31,857
11	127.43	576.81	704.24	31,280
12	125.12	579.12	704.24	30,701
13	122.80	581.44	704.24	30,119
14	120.48	583.76	704.24	29,536
15	118.14	586.10	704.24	28,950
16	115.80	588.44	704.24	28,361
17	113.44	590.80	704.24	27,770
18	111.08	593.16	704.24	27,177
19	108.71	595.53	704.24	26,582
20	106.33	597.91	704.24	25,984
21	103.93	600.31	704.24	25,383
22	101.53	602.71	704.24	24,781
23	99.12	605.12	704.24	24,176
24	96.70	607.54	704.24	23,568
25	94.27	609.97	704.24	22,958
26	91.83	612.41	704.24	22,346
27	89.38	614.86	704.24	21,731
28	86.92	617.32	704.24	21,113
29	84.45	619.79	704.24	20,494
30	81.97	622.27	704.24	19,871
31	79.49	624.75	704.24	19,247
32	76.99	627.25	704.24	18,619
33	74.48	629.76	704.24	17,990
34	71.96	632.28	704.24	17,357
35	69.43	634.81	704.24	16,723
36	66.89	637.35	704.24	16,085
37	64.34	639.90	704.24	15,445
38	61.78	642.46	704.24	14,803
39	59.21	645.03	704.24	14,158
40	56.63	647.61	704.24	13,510
41	54.04	650.20	704.24	12,860
42	51.44	652.80	704.24	12,207
43	48.83	655.41	704.24	11,552
44	46.21	658.03	704.24	10,894
45	43.58	660.66	704.24	10,233
46	40.93	663.31	704.24	9,570
47	38.28	665.96	704.24	8,904
48	35.62	668.62	704.24	8,235
49	32.94	671.30	704.24	7,564
50	30.26	673.98	704.24	6,890
51	27.56	676.68	704.24	6,213
52	24.85	679.39	704.24	5,534
53	22.14	682.10	704.24	4,852
54	19.41	684.83	704.24	4,167
55	16.67	687.57	704.24	3,479
56	13.92	690.32	704.24	2,789
57	11.16	693.08	704.24	2,096
58	8.38	695.86	704.24	1,400
59	5.60	698.64	704.24	701
60	2.81	701.43	704.24	0