You have just purchased a car and taken out a $38,000 loan. The loan has a five-

Question

You have just purchased a car and taken out a $38,000 loan. The loan has a five-year term with monthly payments and an APR of 5.9% a. How much will you pay in interest, and how much will you pay in principal, during the first month, second month, and first year? (Hint Compute the loan balance after one month, two months, and one year.) b. How much will you pay in interest, and how much will you pay in principal, during the fourth year (i.e., between three and four years from now)? Note: Be cereful not to round any intermediate steps less than six decimal places.) . How much you pay in terest and how much will you pay principal during e rs mon second mont , an ist ear Hnt or put th During the first month, you will pay $in principal Round to the nearest cent) During the first month, you will pay sn interest (Round to the nearest cent) During the second month, you will pay $in principal. (Round to the nearest cent) During the second month, you will pay S in interest. (Round to the nearest cent) During the first year, you will pay S in principal. (Round to the nearest cent.) During the first year, you will pay Sin interest. (Round to the nearest cent) b. How much will you pay in interest, and how much will you pay in principal, during the fourth year (i.e., between three and four years from now)? During the fourth year you will pay s in principal. (Round to the nearest cent) During the fourth year, you ill pay S in interest (Round to the nearest cent.) oani balance after one month, wo months, and one ear.

Explanation / Answer

Amortisation Table

a) Principal first month =546.05
Interest first month =186.83  
Principal Second month =548.73
Interest Second month = 184.15
Principal first year =6732.70
Interest first year = 2061.87
b) Principal 4th year =8032.87
Interest 4th year = 761.70

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Months Beginning Principal PMT Using Excel formula = PMT(5.9%/12,60,-38000) Interest Part of PMT= Beginning Principal * 5.9%/12 Principal Part of PMT=
PMT - Interest part of PMT Ending Principal= Beginning Principal - Principal Part of PMT 1 38000 $732.88 186.83 $546.05 $37,453.95 2 $37,453.95 $732.88 184.15 $548.73 $36,905.22 3 $36,905.22 $732.88 181.45 $551.43 $36,353.79 4 $36,353.79 $732.88 178.74 $554.14 $35,799.65 5 $35,799.65 $732.88 176.01 $556.87 $35,242.78 6 $35,242.78 $732.88 173.28 $559.60 $34,683.18 7 $34,683.18 $732.88 170.53 $562.36 $34,120.82 8 $34,120.82 $732.88 167.76 $565.12 $33,555.70 9 $33,555.70 $732.88 164.98 $567.90 $32,987.81 10 $32,987.81 $732.88 162.19 $570.69 $32,417.11 11 $32,417.11 $732.88 159.38 $573.50 $31,843.62 12 $31,843.62 $732.88 156.56 $576.32 $31,267.30 13 $31,267.30 $732.88 153.73 $579.15 $30,688.15 14 $30,688.15 $732.88 150.88 $582.00 $30,106.15 15 $30,106.15 $732.88 148.02 $584.86 $29,521.30 16 $29,521.30 $732.88 145.15 $587.73 $28,933.56 17 $28,933.56 $732.88 142.26 $590.62 $28,342.94 18 $28,342.94 $732.88 139.35 $593.53 $27,749.41 19 $27,749.41 $732.88 136.43 $596.45 $27,152.96 20 $27,152.96 $732.88 133.50 $599.38 $26,553.58 21 $26,553.58 $732.88 130.56 $602.33 $25,951.26 22 $25,951.26 $732.88 127.59 $605.29 $25,345.97 23 $25,345.97 $732.88 124.62 $608.26 $24,737.71 24 $24,737.71 $732.88 121.63 $611.25 $24,126.45 25 $24,126.45 $732.88 118.62 $614.26 $23,512.20 26 $23,512.20 $732.88 115.60 $617.28 $22,894.92 27 $22,894.92 $732.88 112.57 $620.31 $22,274.60 28 $22,274.60 $732.88 109.52 $623.36 $21,651.24 29 $21,651.24 $732.88 106.45 $626.43 $21,024.81 30 $21,024.81 $732.88 103.37 $629.51 $20,395.30 31 $20,395.30 $732.88 100.28 $632.60 $19,762.70 32 $19,762.70 $732.88 97.17 $635.71 $19,126.98 33 $19,126.98 $732.88 94.04 $638.84 $18,488.14 34 $18,488.14 $732.88 90.90 $641.98 $17,846.16 35 $17,846.16 $732.88 87.74 $645.14 $17,201.02 36 $17,201.02 $732.88 84.57 $648.31 $16,552.72 37 $16,552.72 $732.88 81.38 $651.50 $15,901.22 38 $15,901.22 $732.88 78.18 $654.70 $15,246.52 39 $15,246.52 $732.88 74.96 $657.92 $14,588.60 40 $14,588.60 $732.88 71.73 $661.15 $13,927.45 41 $13,927.45 $732.88 68.48 $664.40 $13,263.04 42 $13,263.04 $732.88 65.21 $667.67 $12,595.37 43 $12,595.37 $732.88 61.93 $670.95 $11,924.42 44 $11,924.42 $732.88 58.63 $674.25 $11,250.17 45 $11,250.17 $732.88 55.31 $677.57 $10,572.60 46 $10,572.60 $732.88 51.98 $680.90 $9,891.70 47 $9,891.70 $732.88 48.63 $684.25 $9,207.45 48 $9,207.45 $732.88 45.27 $687.61 $8,519.84 49 $8,519.84 $732.88 41.89 $690.99 $7,828.85 50 $7,828.85 $732.88 38.49 $694.39 $7,134.46 51 $7,134.46 $732.88 35.08 $697.80 $6,436.66 52 $6,436.66 $732.88 31.65 $701.23 $5,735.42 53 $5,735.42 $732.88 28.20 $704.68 $5,030.74 54 $5,030.74 $732.88 24.73 $708.15 $4,322.60 55 $4,322.60 $732.88 21.25 $711.63 $3,610.97 56 $3,610.97 $732.88 17.75 $715.13 $2,895.84 57 $2,895.84 $732.88 14.24 $718.64 $2,177.20 58 $2,177.20 $732.88 10.70 $722.18 $1,455.02 59 $1,455.02 $732.88 7.15 $725.73 $729.30 60 $729.30 $732.88 3.59 $729.30 $0.00

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