On September 1, 2009, Susan Chao bought a motorcycle for $26,000. She paid $1,20
ID: 2640098 • Letter: O
Question
On September 1, 2009, Susan Chao bought a motorcycle for $26,000. She paid $1,200 down and financed the balance with a five-year loan at a stated annual interest rate of 6.8 percent, compounded monthly. She started the monthly payments exactly one month after the purchase (i.e., October 1, 2009). Two years later, at the end of October 2011, Susan got a new job and decided to pay off the loan.
If the bank charges her a 1 percent prepayment penalty based on the loan balance, how much must she pay the bank on November 1, 2011?
Find Total Payment
Explanation / Answer
the motorcycle value= $26,000
down payment= $1200
balance amount= $24,800, the time duration to pay is 5 years in installments, and interest is 6.8%
she paid it 2 years, the amount she paid= $9920 in capital amount
the remaining amount she has to pay is= $14,880, plus 1% bank charge on it
= $14,880+ 148.8= $15028.8
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