Question

5) A man agrees to pay $300 per month for 48 months to pay off a car loan. If interest of 12% per annum is charged monthly, how much did the car originally cost? How much interest was paid? 6) Chase Bank was offering a 30-year fixed-rate mortgage of 7.38%. George and Debby Ashton purchased a house for $180,000. After putting 20% down as a down payment. they finance the balance with Chase Bank. a. Determine the size of the down payment and the amount financed. b. Determine the monthly payment needed to amortize the loan

Answer 1

5). Loan Amount = Monthly Payment * [{1 - (1 + r)^-n} / r]

= $300 * [{1 - (1 + 0.12/12)^-48} / (0.12/12)]

= $300 * [0.3797 / 0.01]

= $300 * 37.9740 = $11,392.19

Total Amount Paid = Monthly Payment * No. of Payments = $300 * 48 = $14,400

Total Interest Paid = Total Amount Paid - Loan Amount = $14,400 - $11,392.19 = $3,007.81

6-a). Down payment = Purchase Cost * Down payment % = $180,000 * 0.20 = $36,000

Loan Amount = Purchase Cost - Down payment = $180,000 - $36,000 = $144,000

6-b). Monthly Payment = [Loan Amount * r] / [1 - (1 + r)^-n]

= [$144,000 * (0.0738 / 12)] / [1 - {1 + (0.0738 / 12)}^-(30*12)]

= $885.60 / 0.8900 = $995.06