A Silver Hummer H3 sells for $98,000 tax included.GMAC lends money at the rate of 6.9% APR.You are at the beginning of the fourth year of a seven year term.You are making monthly payments on the loan.How much interest do you pay in the first month of the fourth year of the loan?

Question

Quizplus · Accepted Answer

Step 1 - Calculate the payment.
PV = PMT × 11ea7fdb_fc21_08bb_a768_31a219d32f23_TB2902_11 PMT = PV / 11ea7fdb_fc21_08bc_a768_1dd9a1ec3304_TB2902_11 PMT = 98,000 / 11ea7fdb_fc21_2fcd_a768_ab0cc2722dec_TB2902_11 = $1,474.30
Using a financial calculator:
N = 84, I = .575, PV = -98,000, FV = 0, cpt PMT = $1,474.30
Step 2 - Calculate the principal still owed at the end of year 3.
PV = PMT × 11ea7fdb_fc21_2fce_a768_a5661fb9c788_TB2902_11 PV = 1,474.30 × 11ea7fdb_fc21_2fcf_a768_dd1677cb0c22_TB2902_00 = $61,686.51
Using a financial calculator:
N = 48, I/Y = .575, PMT = -1,474.30, FV = 0, cpt PV = $61,686.51
Interest = 0.00575 ∗ 61,686.51 = $354.70

A Silver Hummer H3 Sells for $98,000 Tax Included