Scenario 2: You need a $12,000 loan to buy a good used car. Your bank offers a 3-year loan with an APR of 5% and a 5-year loan with an APR of 8%. Find the monthly payment and total interest paid for each loan option. Which would you choose? What is the better deal?

Scenario 2: You need a $12,000 loan to buy a good used car. Your bank offers a 3-year loan with an APR of 5% and a 5-year loan with an APR of 8%. Find the monthly payment and total interest paid for each loan option. Which would you choose? What is the better deal?

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Concept explainers

Cost of Credit

The cost of credit is an extra amount that the borrower has to pay besides the loan amount. These credit charges may vary from loan to loan. The cost of credit includes interest charges, maintenance charges, and arrangement charges. Some of the costs are mandatorily collected by the lender based on the loan amount and tenure of the loan. The cost of credit is also called finance charges of the credit.

Question

Use the Loan Payment Formula in the screenshot below to answer the question.

Scenario 2:
You need a $12,000 loan to buy a good used car. Your bank offers a 3-year loan with an APR of 5% and a 5-year loan with an APR of 8%. Find
the monthly payment and total interest paid for each loan option. Which would you choose? What is the better deal?

The Loan
Payment
Formula
(monthly
payments)
PYMT =
Principal - (APR)
.
12
1- (1. APR-months)]
- (1+12)
PYMT= monthly payment
APR = annual percentage rate
months = number of months to pay off
the loan

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You will usually have choices of interest rates and loan term when seeking a loan. For the following, calculate the monthly payment and total interest over the loan term with each option.You need a $20,000 to buy a used car. Your bank offers a 3 year loan at 5%, a 4 year loan at 6%, and a 5 year loan at 7%.3 year loan at 5%: Monthly payment: $ Total: $ Total interest: $ 4 year loan at 6%: Monthly payment: $ Total: $ Total interest: $ 5 year loan at 7%: Monthly payment: $ Total: $ Total interest: $
Suppose that you decide to borrow 16000 for a new car. You can select one of the following loans each requiring regular monthly payments. Installment loan A three-year loan at 6.3% Installment loan B five -year loan at 6.4% What would be the monthly payments for each loan and total interest for them also? How much will the buyer save in interest?
(Q) You would like to purchase a home and are interested to find out how much you can borrow. When your lender calculates your debt to income ratio, he determines that your maximum monthly payment can be no more than $3, 200. You would like to have a 30 year fully amortizing loan and the interest rate offered on such a loan is currently 8.5%. Given these constraints, what is the largest loan you can obtain?
Pls help on ur own.Suppose you take out a car loan that requires you to pay $8,000 now, $5,000 at the end of year 1, and $7,000 at the end of year 2. The interest rate is 5% now and increases to 9% in the next year. What is the present value of the payments?
Suppose you need to borrow $200,000 to buy a home, and you are deciding between a 15 year mortgage and a 30 year mortgage. Research a bank offering 15 year and 30 year mortgage loans and find the interest rates on those loans. Use the techniques you learned in this Module to do the following: 1. Calculate the monthly payment for a 15-year mortgage and for a 30-year mortgage. 2. Find the total amount of interest you will pay on the 15 year mortgage and on the 30 year mortgage. 3. Describe some of the factors (financial and non-financial) that can influence whether to obtain a shorter term mortgage or a longer term mortgage. 4. Which mortgage would you take, the 15 year or the 30 year? Explain your decision.
Solve the following problems. Round your results to the nearest cent as needed. You need a loan to purchase a car. After the down payment, you need to borrow $24, 200. If a bank offers you a loan at 6.9% for 6 years, how much will your monthly payment be? How much will you pay in interest? Your monthly payment will be $ dollars You will pay a total of $ dollars TVM Calculator in interest
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Example 5: While shopping for a car loan, you get the following offers: Solid Savings & Loan is willing to loan you $10,000 at 9% interest for 4 years. Fifth Federal Bank & Trust will loan you the $10,000 at 7% interest for 3 years. Both require monthly payments. You can afford to pay $250 per month. Which loan, if either, can you take?
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In the Excel Payment Function file that follows, you are looking to see what your basic mortgage payment will be if you buy a home for $250,000. It will be a 30-year mortgage. The interest your bank will charge will be 7.5%. In cell C5, create a function that determines what your monthly payment will be.
The formula below finds the monthly payment for a loan (car, mortgage, student): P=I (r/1-(1+r)-n ) 7. If you want to buy a car that costs $16,000 with a loan at 3% APR how many years should you finance the car if you want your payment to be below $230? Do this problem any way you want, but clearly communicate your thinking.

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