In: Finance
Suppose you purchase a new car for $27,000. You do not have money in your bank today but since you have just graduated from UTSA and have a job with high five figure annual salary, you see no problems in taking a five-year loan from your dealer. After looking at your options, you agree to the following terms: 0% down payment with 6.75% APR (compounded monthly). The loan must be paid back in monthly payments over the five years. (Round your answers to the nearest cent.)
(a)How much (in $) do you need to pay each month? (Hint: If you cannot solve this question, make up a reasonable number as an answer, say $700, and answer the remaining parts)
$
(b)In the first month, how much (in $) of the payments goes towards paying off principal and how much (in $) goes towards interest payments?
interest$
principal$
How much principal (in $) is remaining after the first month?
$
(c)What about in the second month? How much (in $) of the payments goes towards paying off principal and how much (in $) goes towards interest payments?
interest$
principal$
How much principal (in $) is remaining after the second month?
$
(d)Suppose you want to sell the car after 3 years (36 months). When you sell the car, you must pay off the remaining loan (principal). How much (in $) do you still owe?
$
Part (a): Monthly payments= $531.45 calculated as follows:
Part (b): In the first month,
Amount going to interest= $151.88
Amount going to principal= $379.58
Part (c): In the second month,
Amount going to interest= $149.74
Amount going to principal= $381.71
Principal remaining after second month= $26,238.71
Part (d):
Principal remaining after 3 years= $11,900.17
Relevant portion of amortization schedule appended below: