An auto repair shop borrowed $18,000 to be repaid by monthly payments over 7 years. Interest on the loan is 6% compounded monthly.
(a) What is the size of the periodic payment?
(b) What is the outstanding principal after payment 31?
(c) What is the interest paid on payment 32?
(d) How much principal is repaid in payment 32?
PV of loan amount =18000
Number of months =7*12 =84
Rate per month =6%/12 =0.5%
a) Size of Periodic Payment =PV/((1-(1+r)^-n)/r)
=18000/((1-(1+0.5%)^-84)/0.5%) =262.9540 or 262.95
b)Outstanding Balance on Payment 31 =PV*(1+r)^n-PMT*((1+r)^n-1)/r)
=18000*(1+0.5%)^31-262.954*((1+0.5%)^31-1)/0.5%)
=12216.17
c) Interest paid on payment 32 =12216.17*0.5% =61.08
d) Principal in rapid in payment 32 =Periodic Payment-Interest paid on payment 32 =262.95-61.08 =201.87
An auto repair shop borrowed $18,000 to be repaid by monthly payments over 7 years. Interest...
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