Aerotron Electronics has just bought a used delivery truck for $15,000. The smal

Question

Aerotron Electronics has just bought a used delivery truck for $15,000. The small business paid $1,000 down and financed the rest, with the agreement to pay nothing for the entire 1st year an then to pay $526.83 at the end of each month over years 2, 3, and 4 (first payment is in 13th month) (Round your answer to 4 decimal places for a and b. The tolerance is 0.0005. Round your answers to the nearest whole dollar for ce. The tolerance is /$5.00) a. What nominal interest rate is Aerotron payling on the loan? b. What effective interest rate are they paying? C. How much of the 14th month's payment is interest? How much is principal? 371.23 payment interest- d. How much of the 18th month's payment is interest? How much is principal? and principal- , and principal- payment interest s e. How much of the 22nd month's payment is interest? How much is princpal? payment interest - and principal-

Explanation / Answer

1) Nominal Interest rate=r = (1/t)(A/P - 1)

t=36 months, A=Total amount(Principal + Interest)=18965.88, P=Principal Amount=14000

Calculation: r = (1/36)((18965.88/14000) - 1) = 0.00985294 Converting r decimal to R a percentage R = 0.00985294 * 100 = 0.9853%/month The annual rate 0.9853%/month × 12 months/year = 11.8236%/year.

2)Effective Interest Rate : Effective Period Rate = Nominal Annual Rate / n

= 11.8236% / 12months = 0.9853%

Effective annual interest rate calculation

=[(1 + Nominal Rate / n)^n}]- 1

= [(1 + 11.8236% / 12)^12] - 1 =12.486% per year

3) 14th Installment's Interest = 172.76 and Principal = 354.07

4) 18th Installment's Interest = 147.42 and Principal = 379.40

5) 22nd Installment's Interest = 120.27 and Principal = 406.55

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