Chandler has arranged to buy his Dad’s 2017 BMW for $39,000 at a 7.5% annual interest...
Chandler has arranged to buy his Dad’s 2017 BMW for $39,000 at a 7.5% annual interest rate. The terms require him to amortize the loan with 7 equal end-of-year payments. How much interest would Chandler be paying in Year 2?
A). $2,073.71
B). $2,332.92
C). $2,462.53
D).$2,592.13
E). $2,980.95
Homework Answers
Instalment = Loan / PVAF(r%, n)
= $ 39,000 / PVAF( 7.5% , 7 )
= $ 39,000 / 5.2966
= $ 7363.21
Looan AMortization Table:
| Year | Opening Bal | Instalment | Int | Principal repay | Clsoing Bal |
| 1 | $ 39,000.00 | $ 7,363.21 | $ 2,925.00 | $ 4,438.21 | $ 34,561.79 |
| 2 | $ 34,561.79 | $ 7,363.21 | $ 2,592.13 | $ 4,771.08 | $ 29,790.71 |
| 3 | $ 29,790.71 | $ 7,363.21 | $ 2,234.30 | $ 5,128.91 | $ 24,661.81 |
| 4 | $ 24,661.81 | $ 7,363.21 | $ 1,849.64 | $ 5,513.57 | $ 19,148.23 |
| 5 | $ 19,148.23 | $ 7,363.21 | $ 1,436.12 | $ 5,927.09 | $ 13,221.14 |
| 6 | $ 13,221.14 | $ 7,363.21 | $ 991.59 | $ 6,371.62 | $ 6,849.52 |
| 7 | $ 6,849.52 | $ 7,363.21 | $ 513.71 | $ 6,849.50 | $ - |
Int Paid in Year 2 is 2592.13
OPtion D is correct
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