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You borrowed $10,000 two years ago. The loan terms are: 5-year loan with APR of 12%...

You borrowed $10,000 two years ago. The loan terms are: 5-year loan with APR of 12% and with monthly payments of $222.44. Today, you decided you want to pay off the loan in 20 months rather than the remaining life of the loan. How much more do you have to add to your monthly payment in order to accomplish it?

Write out your answer in the space provided. MAKE SURE TO SHOW HOW YOU OBTAIN THE ANSWER (STEPS NECESSARY). If you do not show your work, you will not get credit. Showing work is not showing the keys used in a financial calculator, doing that will get you 0 credit.

Solutions

Expert Solution

Step-1:Loan balance as of today
Loan balance is the present value of montly payments.
Loan balance = =-pv(rate,nper,pmt) Where,
= $ 6,697.11 rate 12%/12 = 0.01
nper (5-2)*12 = 36
pmt = $     222.44
Step-2:revised monthly payment
Revised monthly payment = =pmt(rate,nper,-pv) Where,
= $     371.12 rate 12%/12 = 0.01
nper = 20
pv = $ 6,697.11
Step-3:Addition to monthly payment
Addition to monthly payment = Revised monthly payment - Existing monthly payment
= $     371.12 - $   222.44
= $     148.68

jeff jeffy answered 2 years ago
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