Question

Kathy Stonewall bought a new car for ​$14 comma 714. A​ dealer's financing was available through a local bank at an interest rate of 13.5​% compounded monthly. Dealer financing required a 8​% down payment and 48 equal monthly payments. Because the interest rate was rather​ high, Kathy checked her credit union for possible financing. The loan officer at the credit union quoted a 11.8​% interest rate for a​ new-car loan and 12.5​% for a used car. But to be eligible for the​ loan, Kathy has to be a member of the union for at least six months. Since she joined the union two months​ ago, she has to wait four more months to apply for the loan.​ Consequently, she decided to go ahead with the​ dealer's financing, and four months later she refinanced the balance through the credit union at an interest rate of 12.5​%. ​(a) Compute the monthly payment to the dealer. The monthly payment to the dealer was ​$ nothing.​ (Round to the nearest​ cent.) ​(b) Compute the monthly payment to the union. The monthly payment to the union was ​$ nothing.​ (Round to the nearest​ cent.) ​(c) What is the total interest payment on each​ loan? The total interest payment to the dealer was ​$ nothing.​ (Round to the nearest​ cent.)

Answer 1

Using Excel

	Value of new car	14714
	Downpayment	8%
	Downpayment amount	1177.12
	Loan required	13536.88
	Dealer interest rate	13.50%
	Dealer interest rate (per month)	1.125%
	Dealer loan ternure (months)	48
a	Monthlty payments	366.53
b	Loan installments left after 4 payment	44
	Loan due	12,665.35
	interrst rate charged by union	12.50%
	Monthly payment to union	360.31
c	Total interest paid to dealer	594.59
	Total amount paid to union	15,853.49
	Total interest paid to union	3,188.14

Showing formula in excel

	Value of new car	14714
	Downpayment	0.08
	Downpayment amount	=F8*F7
	Loan required	=F7-F9
	Dealer interest rate	0.135
	Dealer interest rate (per month)	=F11/12
	Dealer loan ternure (months)	48
a	Monthlty payments	=PMT(F12,F13,-F10)
b	Loan installments left after 4 payment	=F13-4
	Loan due	=PV(F12,F15,-F14)
	interrst rate charged by union	0.125
	Monthly payment to union	=PMT(F17/12,F15,-F16)
c	Total interest paid to dealer	=IPMT(F12,1,F13,-F10) + IPMT(F12,2,F13,-F10)+IPMT(F12,3,F13,-F10)+IPMT(F12,4,F13,-F10)
	Total amount paid to union	=F18*F15
	Total interest paid to union	=F20-F16