Question
In: Finance
Two years ago, you purchased a $20,000 car, putting $4,000 down and borrowing the rest. Your...
Two years ago, you purchased a $20,000 car, putting $4,000 down and borrowing the rest. Your loan was a 36-month fixed rate loan at a stated rate of 7.0% per year. You paid a non-refundable application fee of $100 at that time in cash. Interest rates have fallen during the last two years and a new bank now offers to refinance your car by lending you the balance due at a stated rate of 5.5% per year. You will use the proceeds of this loan to pay off the old loan. Suppose the new loan over the residual loan life requires a $200 non-refundable application fee. Given all this information, should you refinance? How much do you gain/lose if you do?
Solutions
Expert Solution
| Old loan scheme | Amount($) |
| Car Purchase | 20,000.00 |
| Down Payment | 4,000.00 |
| Borrowing | 16,000.00 |
| Interest Per year | 1,120.00 |
| Interest Payable for 3 years | 3,360.00 |
| Outflow under old loan | 3,360.00 |
| New Scheme | |
| Principle amount to payoff old loan | 16,000.00 |
| New loan interest per year | 880.00 |
| Interest cost for 3 years | 2,640.00 |
| Additional Application fee | 200.00 |
| Total outflow under new loan Option | 2,840.00 |
| Gain on converting old loan to new loan | 520.00 |
jeff jeffy answered 3 years agoRelated Solutions
Two years ago, you purchased a $18,000 car, putting $3,500 down and borrowing the rest. Your...
Two years ago, you purchased a $18,000 car, putting $3,500 down
and borrowing the rest. Your loan was a 36-month fixed rate loan at
a stated rate of 7.0% per year. You paid a non-refundable
application fee of $100 at that time in cash. Interest rates have
fallen during the last two years and a new bank now offers to
refinance your car by lending you the balance due at a stated rate
of 4.5% per year. You will use...
Two years ago, you purchased a $18,000 car, putting $3,500 down and borrowing the rest. Your...
Two years ago, you purchased a $18,000 car, putting $3,500 down
and borrowing the rest. Your loan was a 36-month fixed rate loan at
a stated rate of 7.0% per year. You paid a non-refundable
application fee of $100 at that time in cash. Interest rates have
fallen during the last two years and a new bank now offers to
refinance your car by lending you the balance due at a stated rate
of 4.5% per year. You will use...
Jody is planning to buy a car for $20,000, putting 20% down in cash, with the...
Jody is planning to buy a car for $20,000, putting 20% down in
cash, with the rest going towards a loan. The bank tells her that
the interest rate on the loan will be 8% per year, which is then
compounded monthly, for a three-year loan. What is Jody’s monthly
payment going to be?
Two years ago, you purchased your first car and financed your purchase with a five-year loan...
Two years ago, you purchased your first car and financed your
purchase with a five-year loan
at 6.0% p.a. You were making monthly payments of $1,160 on the
car loan and you have just
made your 24th monthly payment on the car today. Assuming that
you have made all 24
payments on time, the current principal balance outstanding on
your car loan is closest to:
a) $26,170.
b) $27,840.
c) $38,130.
d) $41,760.
john is considering buying a new car for $20,000 with $4,000 down payment and a 3-year...
john is considering buying a new car for $20,000 with $4,000
down payment and a 3-year car loan with APR 3.4%. The car's resale
value will be $12,000 at the end of 3 years. The dealership also
offers a lease option with $1000 security deposit which will be
refunded at the end of 3-year lease. The lease monthly payment will
be $300 per month and John could also invest his deposit at 1% in a
saving account. Should John choose...
A four-year insurance policy in the amount of $20,000 was purchased two years ago. What is...
A four-year insurance policy in the amount of $20,000 was
purchased two years ago. What is the adjusting entry to record
insurance expense for the current year?
A.) DEBIT: Insurance Expense for $20,000; CREDIT: Prepaid
Insurance for $20,000
B.) DEBIT: Insurance Expense for $5,000; CREDIT: Prepaid
Insurance for $5,000
C.) DEBIT: Prepaid Insurance for $20,000; CREDIT: Insurance
Expense for $20,000
D.) DEBIT: Prepaid Insurance for $5,000; CREDIT: Insurance
Expense for $5,000
Amanda purchased a car for $28,000. She made an initial down payment of $4,000 and borrowed...
Amanda purchased a car for $28,000. She made an initial down
payment of $4,000 and borrowed the rest of the money. She got an
annual rate of 1.99% on her car loan, which was payable over a
5-year period. The loan required monthly payments (end of each
month).
1. What is the outbalance for her car loan?
2. Using an excel spreadsheet to calculate Amanda’s monthly car
payment.
3. Prepare an amortization table for this loan.
4. How much did...
Amanda purchased a car for $28,000. She made an initial down payment of $4,000 and borrowed...
Amanda purchased a car for $28,000. She made an initial down
payment of $4,000 and borrowed the rest of the money. She got an
annual rate of 1.99% on her car loan, which was payable over a
5-year period. The loan required monthly payments (end of each
month).
1. What is the outbalance for her car loan? Using an excel
spreadsheet to calculate Amanda’s monthly car payment. Prepare an
amortization table for this loan. How much did Amanda pay in...
You bought a car three years ago for $20,000 and financed $16,000 at 6 percent APR...
You bought a car three years ago for $20,000 and financed
$16,000 at 6 percent APR for 60 months. You are now thinking about
trading in your vehicle for a new one and would like to know how
much you still owe on the loan. Assuming that you have made 36
payments so far, what is the balance remaining on your
loan?
You just purchased a car for $50,000. You paid $10,000 for the down payment and the rest is the loan. The car loan is for 36 months at an annual
You just purchased a car for $50,000. You paid $10,000 for the down payment and the rest is the loan. The car loan is for 36 months at an annual interest rate of 6%. The loan payments should be made at the end of each month.A. How much is the monthly payment on the loan? Total monthly payment is ________.B. How much of the monthly payment is the interest payment in month 17?The interest amount is ________.C. How much of...
ADVERTISEMENT
ADVERTISEMENT
Latest Questions
- Research the internet for companies that have executed data science projects. Pick one company and describe...
- Explain two theories or frameworks for understanding how Western Europe emerged out of 1,000 years of...
- Two cannons are mounted as shown in the drawing and rigged to fire simultaneously. They are...
- What is the potential of a cell made up of Zn|Zn2+ and Cu|Cu2+ half-cells at 25o...
- Write a Java Program using the following instruction: Create the following 3 methods that calculate and...
- How would the S/D curves shift if a $3 tax was imposed on suppliers for each...
- Why should a time-based authentication system invalidate the current password on a successful authentication?
ADVERTISEMENT