Suppose that under the Plan of Repayment one should pay off the debt in a number

Question

Suppose that under the Plan of Repayment one should pay off the debt in a number of equal end-of-month installments (principal and interest). This is the customary way to pay off loans on automobiles, house mortgages, etc. A friend of yours has financed $22,000 on the purchase of a new automobile, and the annual interest rate is 18% (1.5% per month). a. Monthly payments over a 24-month loan period will be how much? b. How much interest and principal will be paid within three month of this loan? Click the icon to view the interest and ann Click the icon to view the interest and annuity table for discrete compounding when i = 1.5% per month a. The monthly payment over a 24-month loan period is $ 1098.33. (Round to the nearest cent.) b. Fill in the table below. (Round to the nearest cent.) Remaining Loan Balance 20901. s 19803.34 18705.01 Payment Number Principal Interest Payment 330 313.53 297.10 Repayment 768.33 s[784.801 801.28

Explanation / Answer

Notes * Interest is calculated as % of loan out standing .

For 1st year , 22000 × 1.5 % = $330

** principal amount =Monthly Installment - interest

=1098.33 - 330

= $768.33

*** Remaining o/ standing balance =o/s loan amount due - principal paid.

= 22000 - 768.33

=$21231.67

For 2nd year,

*Interest = 21231.67 × 1.5% = 318.47

**Principal = 1098.33 - 318.47 = $779.86

***Remaining balance = 21231.67 - 779.86= $ 20451.81

For 3rd yeara

*Interest = 20451.81 × 1.5% =306.77

**Principal = 1098.33 - 306.77 = $791.55

***Remaining balance = 20451.81- 791.55 =$ 19660.26

Payment no. Interest * $ loan payment ( principal) ** Remaining o/sBalance *** 1 330 768.33 21231.67 2 318.47 779.86 20451.81 3 306.77 791.55 19660.26

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