Quantitative Problem: You need $17,000 to purchase a used car. Your wealthy uncl
ID: 2734145 • Letter: Q
Question
Quantitative Problem: You need $17,000 to purchase a used car. Your wealthy uncle is willing to lend you the money as an amortized loan. He would like you to make annual payments for 5 years, with the first payment to be made one year from today. He requires a 8% annual return.
What will be your annual loan payments? Round your answer to the nearest cent. Do not round intermediate calculations.
$
How much of your first payment will be applied to interest and to principal repayment? Round your answer to the nearest cent. Do not round intermediate calculations.
Interest: $
Principal repayment: $
Explanation / Answer
1) By using PMT function in excel we can find annual payment of $4,257.76.
=PMT(8%,5,17000,0)
2) Interest amount in first instalment = $17000*8% =$1360
Principal Payment = $4,257.76 - $1360 = $2897.76