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Down Payment and Loan Payments
Down Payment and Loan Payments. Lucas wants to buy a used car that will cost ?$5,800. How much will his monthly payment be if he puts ?$2,800 down and finances the remainder at 7?% for two? years?
His monthly payment will be ?$ 134.26. ?(Round to the nearest? cent.) [PMT= (0.0058,24,3000)] (My solution)
5800-2800= 3000
7%/12 = 0.0058
12*2 = 24
Tracy is borrowing ?$5,600 on a? six-year, ?14%, ?add-on interest loan. What will? Tracy's monthly payments? be?
?Tracy's monthly payments will be
?$ 143.11. ?(Round to the nearest? cent.)
5,600 + (5,600*14%*6) / 72 = 143.11 (My solution)
Loan Interest. Sharon is considering the purchase of a car. After making the down? payment, she will finance ?$18,110. Sharon is offered three maturities. On a? four-year loan, Sharon will pay ?$433.67 per month. On a? five-year loan,? Sharon's monthly payments will be ?$358.60. On a? six-year loan, they will be ?308.76$. Sharon rejects the? four-year loan, as it is not within her budget.? So, Sharon would pay ?3,406.00$ in interest over the life of the? five-year loan. On the? six-year loan, Sharon would pay ?$4,120.72 in interest. If Sharon had been able to afford the? four-year loan, how much interest would she have saved compared to the? five-year loan?
The interest Sharon would have paid on the? four-year loan is ?$2,706.16. (My solution)?(Round to the nearest? cent.)
If Sharon had been able to afford the? four-year loan, the amount of interest she would have saved compared to the? five-year loan is ?$699.84. (My solution)?(Round to the nearest? cent.)
Mary and Marty are interested in obtaining a home equity loan. They purchased their house five years ago for ?$110,000?, and it now has a market value of ?$139,214. ?Originally, Mary and Marty paid ?$23,124 down on the house and took out a $86,876 mortgage. The current balance on their mortgage is ?$82,001. The bank uses ?% of equity in determining the credit limit. What will their credit limit be if the bank bases their credit limit on equity invested and will loan them ?% of the? equity?
If the bank bases their credit limit on equity invested and will loan them ?% of the? equity, their credit limit will be ?$
34,199 . 40. (My solution) ?(Round to the nearest? dollar.)
Market value: $139,214
Current balance: $82,001
Market value of equity in the home is : (139,214-82,001)*60%
My question is that my solutions are right or not? If not, how can I fix them?
Expert Solution
Answer:
1. The monthly payment of loan is $134.26.
2. The monthly payment will be $143.11.
3. The interest saved, if the loan is taken for 4 years instead of five years, is $699.84.
4. The credit limit will be $45,186.
Step-by-step explanation
1. Compute the monthly payment of loan, using Ms-excel as shown below:
The result of the above excel table is as follows:
Hence, the monthly payment of loan is $134.26.
2. Compute the monthly payment, using the equation as shown below:
Monthly payment = (Borrowings + Interest)/ Total loan period
= {$5,600 + ($5,600*14%*6 years)}/ 72 months
= ($5,600 + $4,704)/ 72
= $143.11
Hence, the monthly payment will be $143.11.
3.
Compute the total interest on 4 year loan, using the equation as shown below:
Total interest = (Monthly payment*Loan period) - Loan value
= ($433.67*4*12) - $18,110
= $20,816.16 - $18,110
= $2,706.16
Hence, the total interest on 4 year loan is $2,706.16.
Compute the interest saved in case of 4 year loan, using the equation as shown below:
Interest saved = Interest in 5 year loan - Interest in 4 year loan
= $3,406 - $2,706.16
= $699.84
Hence, the interest saved, if the loan is taken for 4 years instead of five years, is $699.84.
4. Compute the loan percentage based on equity invested, using the equation as shown below:
Loan percentage = Loan amount/ Equity invested
= $86,876/ $110,000
= 78.9782%
Hence, the loan percentage based on equity invested is 78.9782%.
Compute the credit limit, using the equation as shown below:
Credit limit = (Value of home - Loan balance)*Loan percentage
= ($139,214 - $82,001)*78.9782%
= $57,213*78.9782%
= $45,186
Hence, the credit limit will be $45,186.
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