Math 104 (Finance 5.1-5.3) Fall 2018 Name Payments: You have decided to buy a ne
ID: 2808961 • Letter: M
Question
Math 104 (Finance 5.1-5.3) Fall 2018 Name Payments: You have decided to buy a newer car and need to finance monthly with no money down. The price of the car is $26,500 4. If you finance it for 48 months then the interest rate is 3.95%. What is your payment? a. Formula needed for this situation Payment-s (round to the nearest penny) b. If you finance it for 72 months then the interest rate is 6.75%. What is your payment? (round to the nearest penny) Payment- S (round to the nearest penny) Multiply the payment by the total number of payments made to find the total amount sent to the bank to pay back the $26,500. Now, subtract the loan amount from this to determine the cost of borrowing the $26,500. Do this for both the 48-month loan and the 72-month loan. c. Cost of the 48-month loan $ (this is the total finance charge) Cost of the 72-month loan$ (this is the total finance charge) d. What is the total savings (in finance charges) of choosing the 48-month loan over the 72-month loan? Payments: Jed bought a condo 10 years ago for $285,000 and financed it all for 30 years (monthly payments) at 6.75%. Now, he is considering refinancing his condo because interest rates have dropped. BONUS What is Jed's outstanding principal (balance still owed) now? Formula needed for this situation: Outstanding Principal $ (round to the nearest dollar)Explanation / Answer
a)
Rate = 0.0395 / 12 = 0.003292 or 0.3292%
Present value = Annutiy * [ 1 - 1 / ( 1 + r)n] / r
26500 = Annutiy * [ 1 - 1 / ( 1 + 0.003292)48] / 0.003292
26500 = Annutiy * 44.332399
Annuity = $597.8
Monthly payment will be $597.8
b)
Rate = 0.0675 / 12 = 0.005625 or 0.5625%
Present value = Annutiy * [ 1 - 1 / ( 1 + r)n] / r
26500 = Annutiy * [ 1 - 1 / ( 1 + 0.005625)72] / 0.005625
26500 = Annutiy * 49.069488
Annuity = $448.6
Monthly payment will be $448.6
c)
Cost of 48 month loan = ( 48 * 597.8) - 26500 = $2,194.4
Cost of 72 month loan = ( 72 * 448.6) - 26500 = $5,799.2
d)
Total savings = 5,799.2 - 2,194.4 = $3,604.8