(1)You have just taken out a $20 000 car loan with a 4% APR, compounded monthly....

(1)You have just taken out a $20 000 car loan with a 4% APR, compounded monthly. The loan is for five years. When you make your first payment in one month, how much of the payment will go toward the principal of the loan and how much will go toward interest? (Note: Be careful not to round any intermediate steps to fewer than six decimal places.)

2)You have just sold your house for $ 1 100 000 in cash. Your mortgage was originally a 30-year mortgage with monthly payments and an initial balance of $750 000.

The mortgage is currently exactly18.50years old, and you have just made a payment. If the interest rate on the mortgage is6.25%

(APR), how much cash will you have from the sale once you pay off the mortgage? (Note: Be careful not to round any intermediate steps to

Expert Solution

1-	Monthly Payment	Using PMT function in MS excel	PMT(rate,nper,pv,fv,type)	rate = 4/12 =.3333% nper = 12*5 =60 pv =20000 fv =0 type =0	PMT(0.3333%,60,20000,0,0)	($368.33)
	Amount of interest on first monthly payment	20000*.3333%	66.66
	Amount of principal in first monthly payment	368.33-66.66	301.67

2-	Monthly Payment	Using PMT function in MS excel	PMT(rate,nper,pv,fv,type)	rate = 6.25%/12 =.5208% nper = 12*30 =360 pv =750000 fv =0 type =0	PMT(0.5208%,360,750000,0,0)	($4,617.68)
	Future value of Loan amount at the end of 18.5 Year	Using Future value function in MS excel	fv(rate,nper,pmt,pv,type)	rate = 6.25%/12 =.5208% nper = 12*18.5 =222 pv =750000 PMT =0 type =0	FV(0.5208%,222,0,750000,0)	($2,376,178.82)
	Future value of monthly payment at the end of 18.5 Year	Using Future value function in MS excel	fv(rate,nper,pmt,pv,type)	rate = 6.25%/12 =.5208% nper = 12*18.5 =222 pv =0 PMT = -4617.68 type =0		$1,922,471.43
	balance in loan account	2376178.82-1992471.43				383707.39
	Selling price				1100000
	less balance in loan account				383707.4
	cash in hand after paying off the loan				716292.6

jeff jeffy answered 1 year ago

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