Question

Two years ago you purchased a new SUV. You financed your SUV for 60 months (with payments made at the end of the month) with a loan at 6.2% APR. You monthly payments are $635 and you have just made your 24th monthly payment on your SUV.

a. What is the amount of your original loan?

The amount of the original loan is $. (round to the nearest dollar)

b. Assuming that you have made all of the first 24 payments on time, what is the outstanding principal balance on your SUV loan?

After 24 payments, the outstanding principal balance on the loan is $. (round to the nearest dollar)

c. Assuming that you have made all of the first 24 payments on time, then how much interest have you paid over the first two years of your loan?

After 24 payments, the total amount of interest paid on the loan over the first two years is $.(round to the nearest dollar)

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Answer 1

a)

The original amount of the loan is calculated using the following equation

In the above equation, we have to solve for the present value of the loan.

The amount of the original loan = $ 32688.

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b)

The outstanding balance after 24 payments is calculated as follows

Outstanding balance after 24 payments = $ 20811

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c)

To find out the interest paid over the first two years, we can build the amortization schedule.

Interest paid over first two years = $ 3363

Amortization schedule for 24 months @ 6.2% APR
Month	Beginning balance	Monthly payment	Interest	Principal	Ending balance
1	$32,688	$635.00	$168.89	$466.11	$32,221.89
2	$32,221.89	$635.00	$166.48	$468.52	$31,753.37
3	$31,753.37	$635.00	$164.06	$470.94	$31,282.43
4	$31,282.43	$635.00	$161.63	$473.37	$30,809.06
5	$30,809.06	$635.00	$159.18	$475.82	$30,333.24
6	$30,333.24	$635.00	$156.72	$478.28	$29,854.96
7	$29,854.96	$635.00	$154.25	$480.75	$29,374.21
8	$29,374.21	$635.00	$151.77	$483.23	$28,890.98
9	$28,890.98	$635.00	$149.27	$485.73	$28,405.25
10	$28,405.25	$635.00	$146.76	$488.24	$27,917.01
11	$27,917.01	$635.00	$144.24	$490.76	$27,426.25
12	$27,426.25	$635.00	$141.70	$493.30	$26,932.95
13	$26,932.95	$635.00	$139.15	$495.85	$26,437.10
14	$26,437.10	$635.00	$136.59	$498.41	$25,938.69
15	$25,938.69	$635.00	$134.02	$500.98	$25,437.71
16	$25,437.71	$635.00	$131.43	$503.57	$24,934.14
17	$24,934.14	$635.00	$128.83	$506.17	$24,427.97
18	$24,427.97	$635.00	$126.21	$508.79	$23,919.18
19	$23,919.18	$635.00	$123.58	$511.42	$23,407.76
20	$23,407.76	$635.00	$120.94	$514.06	$22,893.70
21	$22,893.70	$635.00	$118.28	$516.72	$22,376.98
22	$22,376.98	$635.00	$115.61	$519.39	$21,857.59
23	$21,857.59	$635.00	$112.93	$522.07	$21,335.52
24	$21,335.52	$635.00	$110.23	$524.77	$20,810.75
			Interest paid so far = $ 3362.75