Question

Suppose that under the Plan of Repayment one should pay off the debt in a number of equal end-of-month instaliments principal and interest). This is the customary way to pay off loans on automobiles, house mortgages, etc. A friend of yours has financed $15.000 on the purchase of a new automobile, and the annual interest rate is 6% (0.5% per month) a. Monthly payments over a 48-month loan period will be how much? b. How much interest and principal wil be paid within three month of this loan? Click the icon to view the interest and annuity table for discrete compounding when - 0.5% per month Principal Repayment a. The monthly payment over a 48-month loan period is $ (Round to the nearest cont.) b. F in the table below. (Round to the nearest cont.) Payment Number Interest Payment 1 $ 2 $ 3 S Remaining Loan Balance $ $ S $ $

Answer 1

1. EMI(Monthly payment) = Loan amount / [email protected]%, 48 months

= $15,000/42.5803

= $ 352.28

2. Amortization schedule

Payment number(months)	Interest	Principal	Remaining loan balance
1	$15,000*0.5%=$75	$277.28	14,722.72(15000-277.28)
2	$14,722.72*0.5%=73.61	$278.67	14,444.05
3	$14,444.05*0.5%=72.22	$280.06	14,163.99

Total interest paid in 3 months = $75+$73.61+$72.22 =$220.83

Total amount of principal paid in 3 months = $277.28+$278.67+$280.06 =$836.01