Corey buys 10 Tufflift 4-post,4.5-ton car hoists for his parking garage at a total cost of $410,000.He finances this with a five-year loan at 6.2% APR with monthly payments.After he has made the first 20 payments,how much is the outstanding principal balance on his loan?

Question

Quizplus · Accepted Answer

To calculate the outstanding principal balance, we can use the formula for calculating the remaining balance on a loan:

Remaining balance = P * [(1 + r/n)^(nt) - (1 + r/n)^(m)] / [(1 + r/n)^(nt) - 1]

where:
P = principal amount (initial loan amount)
r = annual interest rate (6.2%)
n = number of times interest is compounded per year (12 for monthly payments)
t = total number of years (5)
m = number of payments made (20)

We know that the total cost of the hoists was $410,000, so that is our principal amount (P).

Substituting the values and solving for the remaining balance, we get:

Remaining balance = 410000 * [(1 + 0.062/12)^(12*5) - (1 + 0.062/12)^(12*20)] / [(1 + 0.062/12)^(12*5) - 1]
= 287153.05

Therefore, the outstanding principal balance after 20 payments is $287,153.05, which is closest to answer choice C.

Corey Buys 10 Tufflift 4-Post,4