Question

A friend of yours bought a new sports car with a $4,500 down payment plus a $29,000 car loan that is financed at an interest rate of 0.25% per month for 60 months. After 2 years, the "Blue Book" value of her vehicle in the used-car marketplace is $16,000. a. Calculate the required monthly loan payment on the car. b. How much does your friend still owe on the car loan immediately after she makes her 24th payment? c. Compare your answer to Part (b) to $16,000. This situation is called being "upside down." What can she do about it? d. If she decides to keep the car but pay $200 more each month, how many months will it take her to payoff the remaining loan she owes? a. The required monthly payment is $ (Round to the nearest cent.) b. Your friend still owes $ on the car loan. (Round to the nearest dollar.) c. What is the best thing to do in this situation? Choose the correct answer below. O A. In case the mileage is high, the car is worth more than $16,000 and she should consider selling it. O B. She should keep the car longer and hope the vehicle remains in good working order. O C. She should sell the car immediately. O D. She should stop paying out her loan as it is obviously unfair. d. It will take her months to payoff the remaining loan balance (Round-up to the nearest month)

Answer 1

Loan Amount $29.000 0.25% per morch tilo mouth a Requined mouthly loan payment - *20.000 cost [' - (25 [using PV of annuity CE 521.09 - $521 After making 24 payments, she will still have 36 payments left.C521.09 value of annuity at the end of 24 month 521.09['-.2025334] = 17,418.44 $17,918 6.) she should sell the cox Immediately (d) Now she will pay 721 each month . No. of mouth needed to pay back the loan. 19,00 [ (60253] 0.0025)+ - 0.937 - (1.0025)+ - (1.06624) On solving fort, we get t = 26. Hence she will repay the amount in 26 months