Some years ago, Penny purchased the car of her dreams for $25,000 by paying 20% down at purchase time and taking a $20,000, 5-year, 6% per year, compounded monthly loan with 60 monthly payments of $386.66 each. She is examining her loan situation and would like to have some specific information. Help her obtain the following: (a) Verification of the current monthly payment amount. (b) Total amount she will pay over the 5 years. (c) Total interest she will pay over the 5 years and the percentage this represents of the original loan amount of $20,000. (d) After she missed payment #36 at the very end of the third year, according to the loan agreement, the interest rate increased from 6% to 10% per year, compounded monthly. Based on the remaining principal immediately after the late payment, determine the new monthly payment. Verify that this increased amount is necessary to pay off the loan at the increased rate. (e) Penny is now in her fourth year, has paid the increased payment for 12 payments, and wants to get rid of this loan completely. She wishes to know the remaining principal amount when payment #48 is due. There is no penalty for early repayment of principal.
Some years ago, Penny purchased the car of her
dreams for $25,000 by paying 20% down at purchase
time and taking a $20,000, 5-year, 6% per
year, compounded monthly loan with 60 monthly
payments of $386.66 each. She is examining her
loan situation and would like to have some specific
information. Help her obtain the following:
(a) Verification of the current monthly payment
amount.
(b) Total amount she will pay over the 5 years.
(c) Total interest she will pay over the 5 years
and the percentage this represents of the
original loan amount of $20,000.
(d) After she missed payment #36 at the very
end of the third year, according to the loan
agreement, the interest rate increased from
6% to 10% per year, compounded monthly.
Based on the remaining principal immediately
after the late payment, determine the
new monthly payment. Verify that this increased
amount is necessary to pay off the
loan at the increased rate.
(e) Penny is now in her fourth year, has paid
the increased payment for 12 payments,
and wants to get rid of this loan completely.
She wishes to know the remaining principal
amount when payment #48 is due.
There is no penalty for early repayment of
principal.
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