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I need assistance to solve this problem:On September 1, 2018, you bought a car for $23,000. You paid down $1,200, and finance the rest for 5 years at 6.5% compounded monthly. You paid the monthly payments from October 1, 2018 until October 2020. Then decided to payoff the loan. The bank charge you a 2% prepayment penalty.- How much would you payoff the loan on November 1, 2020?

Question

I need assistance to solve this problem:

On September 1, 2018, you bought a car for $23,000. You paid down $1,200, and finance the rest for 5 years at 6.5% compounded monthly. You paid the monthly payments from October 1, 2018 until October 2020. Then decided to payoff the loan. The bank charge you a 2% prepayment penalty.

- How much would you payoff the loan on November 1, 2020?

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Step 1

Calculation of payoff the loan on November 1, 2020:

First it is required to calculate the total monthly payments of the car for the loan period of 5 years. Using an excel function =PMT, the monthly payment for 5 years is $426.54. The excel spreadsheet is shown below:

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Step 2

The excel spreadsheet workings are shown below:

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Step 3

Calculate the amortization schedule for 24 monthly payments:

We calculate the amortization schedule for 2 years or 24 months because the loan is paid from October 1, 2018 until October 2020, which have 24 months. In other words, th...

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