John zoom Question (3) - (25 points) John Zoom who plans to graduate in May purc

Question

John zoom Question (3) - (25 points) John Zoom who plans to graduate in May purchased a new set of wheels to impress the young ladies (It did not work!) last May when he got a good summer job. After making a down payment, John borrowed $9,000 at 12% interest with monthly compounding to pay for the car. The loan was to be repaid by making 39 equal monthly payments and a single balloon payment at the end of the 40th month. The amount of each of the equal monthly payments was determined by finding the exact amount of a 40-month equal payment series and rounding this amount up to the next highest multiple of 55.00. John made his first monthly payment on June 1,1991, and has made alt payments since on schedule. John's Uncle has just offered to pay John's loan balance on June 1,1992, if John earns a 4-point GPA this semester and graduates in May as scheduled and keeps on making his monthly payments. Forget the fact that John is taking Engineering Economics, and assume that he will get the 4-point! If this all happens, what amount will John's Uncle pay

Explanation / Answer

BORROWED AMOUNT=$9,000

INTEREST=12% P.A COMPOUNDED MONTHLY =12%/12=1%

NO.OF MONTHLY PAYMENTS=39

NO.OF MONTHLY PAYMENTS MADE UPTO JUNE I,1992=12

NO.OF MONTHLY PAYMENTS LEFT=39-12=27

EQUAL MONTHLY PAYMENTS=9,000/40=$225(IN 1 LINE IT IS SAID 39 EQUAL PAYMENTS AND IN 1 IT IS SAID 40.IT IS ASSUMED TO BE 40 EQUAL MONTHLY PAYMENTS)

AMOUNT PAID UPTO JUNE 1 1992=$225*12=$2,700

AMOUNT TO BE PAID BY JOHN'S UNCLE=$9,000-$2,700

=$6,300

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