In order to buy a car, you borrow $33,000 from a friend at 8%/year compounded monthly...
In order to buy a car, you borrow $33,000 from a friend at 8%/year compounded monthly for 4 years. You plan to repay the loan with 48 equal monthly payments.
What is the remaining balance after the 37th payment?
Homework Answers
Formula to calculate EMI with compound interest = [P * R * (1+R)N ] / [(1+R)N -1]
where P = $33,000
R = 8% per year which would be 8% / 12 = 0.0066 monthly
N = 48 months
EMI = [33,000 * 0.0066 * (1+0.0066)48] / [(1+0.0066)48 - 1]
= 298.66 / 0.3712 = 804.57
After 37th payment = 37 * 804.57 = 29,769.45 is repaid.
With 48 installments, you are liable to pay 804.57 * 48 = 38,619.36 out of which 29,769.45 is repaid. 38,619.36 - 29,769.45 = 8,849.91 is pending after 37th installment.
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