Question

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A sailboat costs $23,852. You pay 15% down and amortize the rest with equal monthly payments over a 11-year period. If you must pay 6.6% compounded monthly, what is your monthly payment? How much interest will you pay? Monthly payments: $ (Round to two decimal places.) Interest: $ (Round to two decimal places.)

Answer 1

Calculation of total loan taken
Cost of sailboat	$23,852.00
Less: Down payment	$3,577.80
Loan amount	$20,274.20
Calculation of monthly payment
Present value of annuity	Monthly payment*(1-((1+r)^-n)/r
where r is interest rate and n is number of years
Monthly interest rate (r )	0.55%	6.6%/12
Number of payments	132	11*12
$20,274.20	Monthly payment*(1-((1+0.0055)^-132)/0.0055
$20,274.20	Monthly payment*93.67202
Monthly payment	20274.20/93.67202
Monthly payment	$216.44
Thus, monthly payment is $216.44
Calculation of total interest paid on loan
Total interest paid	Total payments made - Value of loan
Total interest paid	(216.44*132)-20274.20
Total interest paid	$8,295.64
Thus, total interest paid is $8,295.64