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Jill wants to buy a car but needs to calculate how much she can afford to borrow
Jill wants to buy a car but needs to calculate how much she can afford to borrow. The maximum she can repay is $2500 at the end of each quarter and the bank has indicated it will charge a fixed 6.6% p.a compounding quarterly. If she takes a loan for 5 years how much can she afford to borrow? (Do not use the $ sign or commas; include cents e.g 24500.09) Answer:
Loan Details Monthly (Beginning-of-month) Payment (PMT) Effective Annual Rate Monthly interest rate (RATE) Months to Pay Off Loan (NPER) 36 Amount of Loan from Bank (PV) $5,000.00 Recreate the above in excel. You seek to borrow $5,000 from a friend. You promise to repay the loan in 36 monthly repayments commencing today. If the effective annual interest (EAR) rate is 22.0% what is the amount of the monthly repayment? (answer do not include $sign: show cents eg 100.00, and should be a positive number) Answer:
A $19,000 loan is to be repaid with 10 equal half-yearly instalments. Interest is at 7.9%p.a. compounding half-yearly Calculate the principal repaid in the fourth instalment. (use excel; answer to include cents but do not use the comma separator) Answer:
Expert Solution
1. Quarterly Payment =2500
Rate per quarter =6.6%/4
Number of Quarters =4*5
Amount she can afford to borrow =PMT*((1-(1+r)^-n)/r) =2500*((1-(1+6.6%/4)^-20)/(6.6%/4)) =42293.58
2. EAR =22%
Monthly Rate =(1+EAR)^(1/12)-1 =(1+22%)^(1/12)-1 =1.67089638731281%
Number of Months =36
Monthly Payment =PV/((1-(1+r)^-n)/r) =5000/((1-(1+1.67089638731281%)^-36)/1.67089638731281%) =185.95
Using Excel formula we get =PMT(1.67089638731281%,36,-5000) =185.95
3. PV of Loan =19000
Rate semi annually =7.9%/2 =3.95%
Number of half yearly payment =10
Semi annual payment =PV/((1-(1+r)^-n)/r) =19000/(((1-(1+3.95%)^-10)/3.95%) =2336.7009
Excel formula =PMT(3.95%,10,-19000) =2336.7009
Principal outstanding at the end of 3 years using excel formula =FV(3.95%,3,0,-19000)-FV(3.95%,3,-2336.7009) =14050.9576
Principal repaid in year 4 =2336.7009-14050.9576*3.95% =1781.69
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