Question

In: Finance

You are buying a car for $25,000. You will put no money down and get a...

You are buying a car for $25,000. You will put no money down and get a loan for the full purchase price. The bank offers you the following loan terms: APR 8% (Annual percentage rate), 3 year loan with quarterly payments.

Create an amortization schedule paying off the loan.

Expert Solution

Compute the quarterly interest rate, using the equation as shown below:

Quarterly rate = Annual rate/ 4

= 8%/ 4

= 2%

Hence, the quarterly rate is 2%.

Compute the present value annuity factor (PVIFA), using the equation as shown below:

PVIFA = {1 – (1 + Rate)-Number of periods}/ Rate

= {1 – (1 + 0.02)-12}/ 2%

= 10.5753412204

Hence, the present value annuity factor is 10.5753412204.

Compute the quarterly loan payment, using the equation as shown below:

Quarterly loan = Loan amount/ PVIFA

= $25,000/ 10.5753412204

= $2,363.98991568

Hence, the quarterly loan payment is $2,363.98991568.

Prepare the amortization table, using MS-excel as shown below:

The result of the above excel table is as follows:

Hence, the above-mentioned is the amortization table of the loan.

jeff jeffy answered 1 year ago

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