Loan Amortization Schedule You purchase a fully loaded Honda Accord with an MSRP of $32,000 for...

Loan Amortization Schedule

You purchase a fully loaded Honda Accord with an MSRP of $32,000 for $27,000. You pay the 3% tax of $810 up front and put down $5,000. The dealer offers a simple interest installment loan with an annual rate of 5% for 3 years. The projected resale value of the car after 2 years is $17,000.

Compute the loan value and monthly loan payments. (10 pts)
Create a monthly amortization schedule over the entire loan period. (10 pts)
Compute total interest over the entire loan period. (5 pts)
Compute the total cash outflow (tax, plus down payment, plus total monthly loan payments). (8 pts)
Compute the amount you would net after selling the car at 2 years. (7 pts)
Does the principal portion of the payment increase or decrease as the months progress? (5 pts)
Does the interest portion of the payment increase or decrease as the months progress? (5 pts)

Please show all calculations and complete monthly amortization schedule.

Expert Solution

Loan value and monthly repayments given below

Hond accord MSRP cost price	$ 27,000
TAX	$ 810
TOTAL AMOUNT	$ 27,810
upfront payment	$ 5,810
Loan value	$ 22,000
Simple interest	5%
EMI montly payment	$ (659)

Amortization table given below

SNO	Prinicpal at the beginning	Interest	EMI	Month end pricnipal	Prinicipal paid
1	$ 22,000.00	$ 92	$ (659)	$ 21,432	$ (568)
2	$ 21,432	$ 89	$ (659)	$ 20,862	$ (570)
3	$ 20,862	$ 87	$ (659)	$ 20,290	$ (572)
4	$ 20,290	$ 85	$ (659)	$ 19,715	$ (575)
5	$ 19,715	$ 82	$ (659)	$ 19,138	$ (577)
6	$ 19,138	$ 80	$ (659)	$ 18,558	$ (580)
7	$ 18,558	$ 77	$ (659)	$ 17,976	$ (582)
8	$ 17,976	$ 75	$ (659)	$ 17,392	$ (584)
9	$ 17,392	$ 72	$ (659)	$ 16,805	$ (587)
10	$ 16,805	$ 70	$ (659)	$ 16,215	$ (589)
11	$ 16,215	$ 68	$ (659)	$ 15,624	$ (592)
12	$ 15,624	$ 65	$ (659)	$ 15,029	$ (594)
13	$ 15,029	$ 63	$ (659)	$ 14,433	$ (597)
14	$ 14,433	$ 60	$ (659)	$ 13,833	$ (599)
15	$ 13,833	$ 58	$ (659)	$ 13,232	$ (602)
16	$ 13,232	$ 55	$ (659)	$ 12,627	$ (604)
17	$ 12,627	$ 53	$ (659)	$ 12,021	$ (607)
18	$ 12,021	$ 50	$ (659)	$ 11,411	$ (609)
19	$ 11,411	$ 48	$ (659)	$ 10,800	$ (612)
20	$ 10,800	$ 45	$ (659)	$ 10,185	$ (614)
21	$ 10,185	$ 42	$ (659)	$ 9,568	$ (617)
22	$ 9,568	$ 40	$ (659)	$ 8,949	$ (619)
23	$ 8,949	$ 37	$ (659)	$ 8,327	$ (622)
24	$ 8,327	$ 35	$ (659)	$ 7,702	$ (625)
25	$ 7,702	$ 32	$ (659)	$ 7,075	$ (627)
26	$ 7,075	$ 29	$ (659)	$ 6,445	$ (630)
27	$ 6,445	$ 27	$ (659)	$ 5,812	$ (633)
28	$ 5,812	$ 24	$ (659)	$ 5,177	$ (635)
29	$ 5,177	$ 22	$ (659)	$ 4,540	$ (638)
30	$ 4,540	$ 19	$ (659)	$ 3,899	$ (640)
31	$ 3,899	$ 16	$ (659)	$ 3,256	$ (643)
32	$ 3,256	$ 14	$ (659)	$ 2,610	$ (646)
33	$ 2,610	$ 11	$ (659)	$ 1,962	$ (648)
34	$ 1,962	$ 8	$ (659)	$ 1,311	$ (651)
35	$ 1,311	$ 5	$ (659)	$ 657	$ (654)
36	$ 657	$ 3	$ (659)	$ (0)	$ (657)

Total interest over the loan	$ 27,000
TAX	$ 810
TOTAL AMOUNT	$ 27,810
A.Period	$ 36
upfront payment	$ 5,810
B.Loan value	$ 22,000
Simple interest	5%
c.EMI montly payment	$ (659.36)
Total interest	total amount paid -loan taken
	AXC-B
	659.36*36-22000
Total interest	$ (1,737)

Total cashoutflow given below

Total cashoutlow
Ouflow during the beginning		$ 5,810
EMI Of 659 .36 paid for 36 months		$ 23,737
Total cashoutflow		$ 29,547

Amount if car is sold in 2 years

Ouflow during the beginning		$ 5,810
EMI Of 659 .36 paid for 24 months		$ 15,825
Prinicpal balance to be paid		$ 7,702
Total cashoutlow		$ 29,337
Sale of Car		$ 17,000
Cashoutflow if the car is sold in 2 years		$ 12,337

Prinicipal portion of the payment increase over the month progress as given in the amortization schedule

Interestl portion of the payment Decrease over the month progress as given in the amortization schedule

SN

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