Good-Deal Inc. developed a new sales gimmick to help sell its inventory of new a

Question

Good-Deal Inc. developed a new sales gimmick to help sell its inventory of new automobiles. Because many new car buyers need financing, Good-Deal offered a low downpayment and low car payments for the first year after purchase. It believes that this promotion will bring in some new buyers. On January 1, 2014, a customer purchased a new $34,960 automobile, making a downpayment of $1,280. The customer signed a note indicating that the annual rate of interest would be 12% and that quarterly payments would be made over 3 years. For the first year, Good-Deal required a $421 quarterly payment to be made on April 1, July 1, October 1, and January 1, 2015. After this one-year period, the customer was required to make regular quarterly payments that would pay off the loan as of January 1, 2017.

(a) Prepare a note amortization schedule for the first year. (Round answers to 0 decimal places, e.g. 38,548.)

(b) Indicate the amount the customer owes on the contract at the end of the first year. (Round answer to 0 decimal places, e.g. 38,548.)

(c) Compute the amount of the new quarterly payments. (Round answer to 0 decimal places, e.g. 38,548.)

(d) Prepare a note amortization schedule for these new payments for the next 3 years. (Round answers to 0 decimal places, e.g. 38,548.)

Please show calculations!

Explanation / Answer

Purchase price of car 34960 Down payment -1280 Loan amount 33680 Annual rate of interest 12% Answer a Date Loan balance Interest Total payment Loan balance 01-Jan-14 33680 01-Apr-14 33680 1010.4 421 34269.4 01-Jul-14 34269.4 1028.082 421 34876.482 01-Oct-14 34876.482 1046.294 421 35501.77646 01-Jan-15 35501.77646 1065.053 421 36145.82975 Answer b Loan balance 01.01.2015 36145.82975 Interest rate per period (12/4) 3% No of periods in quarters(2*4) 8 Answer c quarterly payment -5,149.20 Answer d Date Loan balance Interest Total payment Principal payment Loan balance 01-Jan-15 35501.77646 0 01-Apr-15 36145.82975 1084.375 -5,149.20 -4,064.83 32,081.00 01-Jul-15 32,081.00 962.43 -5,149.20 -4,186.77 27,894.23 01-Oct-15 27,894.23 836.8268 -5,149.20 -4,312.38 23,581.85 01-Jan-16 23,581.85 707.4554 -5,149.20 -4,441.75 19,140.10 01-Apr-16 19,140.10 574.203 -5,149.20 -4,575.00 14,565.10 01-Jul-16 14,565.10 436.9529 -5,149.20 -4,712.25 9,852.85 01-Oct-16 9,852.85 295.5854 -5,149.20 -4,853.62 4,999.23 01-Jan-17 4,999.23 149.9768 -5,149.20 -4,999.23 -0.00

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