Todd purchases a new car for $22,650. He makes a $5000 down payment and finances the remainder through an amortized loan at an annual interest rate of 5.6%, compounded monthly for 6 years. The monthly payment is $289.19. Complete the first two lines of an amortization schedule for the situation. How is the balance on the first line on the amortization schedule found? O A. Subtract the amount of the down payment from the price of the car. O B. Subtract the amount of the monthly payment from the price of the car. O C. Add the amount of the monthly payment to the price of the car. O D. Add the amount of the down payment to the price of the car. Describe the procedure of completing a line of an amorization schedule. Choose the correct answer below. O A. Place the monthly payment under the pay hent column. To find the portion applied to interest, multiply the balance by the monthly interest rate. To find the portion applied to principal, subtract the portion applied to interest from the monthly payment. To find the new balance, subtract the portion applied to interest from the balance. B. Place the monthly payment under the payment column. To find the portion applied to interest, multiply the balance by the annual interest rate. To find the portion applied to principal, subtract the portion applied to interest from the monthly payment. To find the new balance, subtract the portion applied to principal from the balance. OC. Place the monthly payment under the payment column. To find the portion applied to interest, multiply the balance by the monthly interest rate. To find the portion applied to principal, subtract the portion applied to interest from the monthly payment. To find the new balance, subtract the portion applied to principal from the balance.
Todd purchases a new car for $22,650. He makes a $5000 down payment and finances the remainder through an amortized loan at an annual interest rate of 5.6%, compounded monthly for 6 years. The monthly payment is $289.19. Complete the first two lines of an amortization schedule for the situation. How is the balance on the first line on the amortization schedule found? O A. Subtract the amount of the down payment from the price of the car. O B. Subtract the amount of the monthly payment from the price of the car. O C. Add the amount of the monthly payment to the price of the car. O D. Add the amount of the down payment to the price of the car. Describe the procedure of completing a line of an amorization schedule. Choose the correct answer below. O A. Place the monthly payment under the pay hent column. To find the portion applied to interest, multiply the balance by the monthly interest rate. To find the portion applied to principal, subtract the portion applied to interest from the monthly payment. To find the new balance, subtract the portion applied to interest from the balance. B. Place the monthly payment under the payment column. To find the portion applied to interest, multiply the balance by the annual interest rate. To find the portion applied to principal, subtract the portion applied to interest from the monthly payment. To find the new balance, subtract the portion applied to principal from the balance. OC. Place the monthly payment under the payment column. To find the portion applied to interest, multiply the balance by the monthly interest rate. To find the portion applied to principal, subtract the portion applied to interest from the monthly payment. To find the new balance, subtract the portion applied to principal from the balance.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
Related questions
Question
(20) Please show how you got
a. the first cell of column 3
b. how you got the first cell of column 4
c. how you got the first cell of column 5
d. how you got the second cell of column 3
e. how you got the second cell of column 4
f. how you got the second cell of column 5
Transcribed Image Text:**Amortization Schedule Exercise**
**Scenario:**
Todd purchases a new car for $22,650. He makes a $5,000 down payment and finances the remainder through an amortized loan at an annual interest rate of 5.6%, compounded monthly for 6 years. The monthly payment is $289.19. Complete the first two lines of an amortization schedule for the situation.
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**Question 1:**
*How is the balance on the first line on the amortization schedule found?*
- **A.** Subtract the amount of the down payment from the price of the car.
- **B.** Subtract the amount of the monthly payment from the price of the car.
- **C.** Add the amount of the monthly payment to the price of the car.
- **D.** Add the amount of the down payment to the price of the car.
**Question 2:**
*Describe the procedure of completing a line of an amortization schedule. Choose the correct answer below.*
- **A.** Place the monthly payment under the payment column. To find the portion applied to interest, multiply the balance by the monthly interest rate. To find the portion applied to principal, subtract the portion applied to interest from the monthly payment. To find the new balance, subtract the portion applied to interest from the balance.
- **B.** Place the monthly payment under the payment column. To find the portion applied to interest, multiply the balance by the annual interest rate. To find the portion applied to principal, subtract the portion applied to interest from the monthly payment. To find the new balance, subtract the portion applied to principal from the balance.
- **C.** Place the monthly payment under the payment column. To find the portion applied to interest, multiply the balance by the monthly interest rate. To find the portion applied to principal, subtract the portion applied to interest from the monthly payment. To find the new balance, subtract the portion applied to principal from the balance.
---
**Amortization Schedule:**
| **Balance** | **Payment** | **Portion of payment applied to interest** | **Portion of payment applied to principal** | **New balance** |
|-------------|-------------|-------------------------------------------|--------------------------------------------|-----------------|
| $ | $ | $ | $ | $ |
| $ | $ | $ | $ | $ |
*(Type integers or decimals
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