George Costanza has just taken out an $21,581.00, 60-month car loan from his loc

Question

George Costanza has just taken out an $21,581.00, 60-month car loan from his local bank with a 9.00% interest rate compounded monthly. At the end of the second year, George plans on making a $2,757.00 payment directly to the loan’s principal and then to keep on making his regular monthly payments.

What is the balance remaining on the loan after the extra payment to principal is made? (This happens after year 2...)

How many months remain on the loan after the extra payment is made? (Do not round)

Explanation / Answer

Monthly payment is:

Amortization schedule for the first two years:

Paying 2757 reduces principal balance to 11330.73

Amortization schedule then follows:

Total number of months taken to pay balance was 39

Monthly payment = [P * R * (1+R)^N ] / [(1+R)^N -1] Using the formula: Principle P                                                           21,581.00 Rate of interest per period: Annual rate of interest 9.000% Frequency of payment = Once in 1 month period Numer of payments in a year = 12/1 = 12 Rate of interest per period R 0.09 /12 = 0.7500% Total number of payments: Frequency of payment = Once in 1 month period Number of years of loan repayment =                                                                          5 Total number of payments N 5*12 = 60 Period payment using the formula = [ 21581*0.0075*(1+0.0075)^60] / [(1+0.0075 ^60 -1] Monthly payment = 447.99

Related Questions

Navigate

• Browse (All)
• Browse G
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.