The Purchase of a car requires a $25,000 loan to be repaid in monthly installments for...
The Purchase of a car requires a $25,000 loan to be
repaid in monthly installments for four years at 12% interest
compounded monthly and the general inflation is 6% compounded
monthly.
a) Find the actual & constant dollar value of the 20th
payment.
b) The total loan payback amount in constant & actual
dollars.
Homework Answers
Actual 20th payment=25000*(12%/12)/(1-1/(1+12%/12)^(12*4))=658.3458858
Constant 20th payment=658.3458858/(1+6%/12)^20=595.8444394
Total loan payback in actual dollars=658.3458858*12*4=31600.60252
Total loan payback in constant
dollars=658.3458858/(6%/12)*(1-1/(1+6%/12)^(12*4))=28032.57703
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