Question

Today is January 1st, 2019 (T=0). You take out a 6 year fully amortizing auto loan of $24,000. Payments are made at the end of each calendar month. The loan has a fixed annual rate of 4.0% (or 4.0%/12 per month).

22. Calculate the monthly payment on the auto loan. If you were to pay off the balance of the loan at the end of the 2nd month (immediately after making the second monthly payment), the amount of money you would owe the auto dealership is closest to:

1. $23,239

2. $23,371

3. $23,408

4. $23,666

5. $23,705

23. Ignore the monthly payment amount you calculated in the previous problem. Assume you decide to make monthly payments of $503.50 instead. Approximately how many months sooner would you pay off the auto loan?

1. 18

2. 20

3. 22

4. 24

5. 48

Answer 1

2-	Monthly payment = Using PMT function in MS excel	pmt(rate,nper,pv,fv,type)rate = 4%/12 nper = 12*6 = 72 pv = 24000 fv = 0 type =0	PMT(4%/12,72,23000,0,0)	($375.48)
	period	beginning balance	monthly payment	Interest =4%/12 = .333%	Priniciple	year end balance
	0					24000
	1	24000	375.48	79.92	295.56	23704.44
	2	23704.44	375.48	78.9357852	296.5442148	23408
	amount owe to dealership at the end of 2nd month = 23408
3-	Month to pay off the loan	Using nper function in MS excel	nper(rate,pmt,pv,fv,type) rate = 4%/12 = .3333% pmt = -503.5 pv =22432.56 fv =0 type =0	NPER(0.333%,-503.5,24000,0,0)	52
	how many months sooner would you pay off the auto loan	72-52	20