Question

You are looking to purchase a Tesla Model X sport utility vehicle. The price of the vehicle is $94,250. You negotiate a six-year loan, with no money down and no monthly payments during the first year. After the first year, you will pay $1,375 per month for the following five years, with a balloon payment at the end to cover the remaining principal on the loan. The APR on the loan with monthly compounding is 3.4 percent. What will be the amount of the balloon payment six years from now? (Do not round monthly interest rate calculation. Round intermediate value calculation and final answer to 2 decimal places)

Answer 1

Answer:

Amount of Loan at the end of Year 1 = 94250(1 + 0.034/12)¹²

Amount of Loan at the end of Year 1 = $97,504.91

Calculating Balloon Payment,

Using TVM Calculation,

FV = [PV = 97504.91, PMT = -1375, T = 60, I = 0.034/12]

FV = $25,756.17

Balloon Payment = $25,756.17