The unpaid balance of balance of an installment loan is equal to the presnet val

Question

The unpaid balance of balance of an installment loan is equal to the presnet value of the remaining payments. The unpaid balance, P, is given by where PMT is the regular payment amount, r, is the annual interest rate and, n is the number of payment per year, and i is the number of years remaining in a loan.

The price of a car is $24,000. You have saved 20% of the price as a down payment. After the down payment the balance is financed with a 5 year loan at 9%. Determine the unpaid balance after three years. Round all calculations to the nearest dollar.

Explanation / Answer

Total price of the car = $ 24,000

      down payment = 24000*20/100= $ 4800

instalment amount =$ 19,200/3.8896 ( cumulative Pv factor @9%,5years)

                          = $ 4,936

so unpaid balance after three years is= $8885

year total instalment interest principle balance 1 4936 1801 3135 19200-3135=16065 2 4936 1507 3429 16065-3429=12636 3 4936 1185 3571 12636-3751=8885

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