Question

Mr John Smith takes out a $45,000 car loan at 4% annual interest to be repaid over 4 years (48 equal installments).

On the third day of month 14 the loan rate is reduced to 3.5%.

Mr Smith is again lucky because on the tenth day of month 35 the loan rate is reduced to 3.0%

Calculate how much interest Mr Smith has paid at the various rates (including the mixed monthly rates when the rate changes take place).

Also calculate the TOTAL INTEREST paid over the entire duration of the loan repayment                                               [35]

Answer 1

EMI formulae - P(14 ns) P - Amount financed of years Hat dus No of installments Total installments 4x 12 48 When rate = 4% till 1 13 months 4 7 EMI 45000 x (1 + 0 x 4) 45000 x 1.16 48 48 change to 1087.5 month per But soon after 13 months interest rate 3.5%. Total payment to be made 1087.5848 52200 Already paid 1087.5 x 13 2 14137.5 Yet to be paid 59200 - 14137-5 38062.5 Again EMI is calculated , from r month to 448 month fie. A months) EMI 38062.5 x (1 + 35/284) - 2 Again 35 1214.3750 SEPTY

Date Page This EMI of 1914.3750 is paid till 34 months (i.c. 21 months) x 21 1214: 3750 X2 255ol.&s Amount yet to be paid - 38062.58264-25501.85% z 12560.65 EMI @ 37 2 12560-65 (1 + 14/12* 3) 928.5909 EMI paid 928.59 2 오 10875404 13 months 1214.38 for 2 months 14 months you Total Amount paid less : Car Valie Total interest paid = "1639.74 : Average interest monthly payment 7639.74/48 - 19:164 52639.74 45 00

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