An auto repair shop borrowed $15,000 to be repaid by quarterly payments over 4 years. Interest...

An auto repair shop borrowed $15,000

to be repaid by quarterly

payments over 4 years. Interest on the loan is 3%

compounded quarterly.

(a) What is the size of the periodic payment?

(b) What is the outstanding principal after payment

10?

(c) What is the interest paid on payment

11?

(d) How much principal is repaid in payment

11?

Could you please show full steps as i want to use this as a learning tool.

Expert Solution

(a)	Size of periodic payment	$ 998.38

Working:
	Size of periodic payment	=-pmt(rate,nper,pv,fv)
		= $ 998.38

	Where,
	rate	=	3%/4	=	0.0075
	nper	=	4*4	=	16
	pv			=	$ 15,000
	fv			=	0

(b)	Principal balance after payment 10	=PV(rate,nper,pmt,fv)
		= $ 5,836.14

Working:
	Where,
	rate	=	3%/4	=	0.0075
	nper	=	16-10	=	6
	pmt			=	$ -998.38
	fv			=	0

(c)	Interest paid on payment 11	$ 43.77

Working:
	Interest paid on payment 11	=	Loan Balance after payment 10	*	Quarterly interest rate
		=	$ 5,836.14	*	0.0075
		=	$ 43.77

(d)	Principal repaid in payment 11	$ 954.61

Working:

	Principal repaid in payment 11	=	Payment 11	-	Interest paid in payment 11
		=	$ 998.38	-	$ 43.77
		=	$ 954.61

jeff jeffy answered 1 year ago

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