Question

Greg takes out a $22,000 loan to buy new motorcycle. The interest rate is 3.9% per year and the term is 84 months. This works out to be a monthly payment of $300. (a) The first payment includes $71.50 of interest. How much principal is in the first payment? (b) What is the new loan balance after Greg makes the first payment? (c) Explain why it is incorrect to say that Greg will pay $71,50x84 = $6006 in total interest. (d) If Greg paid $400 per month, how would the total interest be affected? It would be more. It would be the same. It would be less.

Answer 1

@ first payment = 300 principal after after first first payment = 300 71.50 = $ 228.50 (b.) - Total loan $ 22,000 loan balance Now first ofter payment 22000 - 228.50 =$/21,771.50 (C) In the first month interest 22000x 3.9. --$71,50 12 in the second month interest is (22000–228.50) X 3.9% =f70.76 due That is interest is reducing in each subsequent payment to repayment of principal in each EMI Therefore = $ 6006 in total interest unny Goreg will pay $71.50 784

(20) since monthly payment is now $400 which is greater than $300 and when monthly increased than total interest would be less. payment is It obtion be would les.