Jim buys a car worth $20,000.He makes a down payment of $1000 and repays the balance with equal monthly payments of $450 at the end of each month for as long as is necessary.If interest on the loan is j₁₂ = 6%,what is the outstanding balance after 24 payments have been made?

Question

Quizplus · Accepted Answer

The outstanding balance after 24 payments can be calculated using the formula for the remaining balance of an amortizing loan. Given the initial loan amount (principal) of $19,000 (after a $1,000 down payment on a $20,000 car), a monthly interest rate of 0.5% (6% annual rate divided by 12 months), and a monthly payment of $450, we can calculate the remaining balance after 24 payments. Using the formula or an amortization calculator, the correct answer is $9,971.66, which accounts for the reduction in principal over 24 months and the application of monthly interest.

Jim Buys a Car Worth $20,000