They are considering trading their car in for a newer used vehicle so that Harry can have dependable transportation for commuting to work. The couple still owes $4,770 to the credit union for their current car, or $265 per month for the remaining 18 months of the 48-month loan. The trade-in value of this car plus $1,000 that Harry earned from a freelance interior design job should allow the couple to pay off the auto loan and leave $1,400 for a down payment on the newer car. The Johnsons have agreed on a sales price for the newer car of $23,000. The money planned for tires will be spent for other incidental taxes and fees associated with the purchase.1. Using the Garman/Forgue companion website or the information in Table 7-2, calculate the monthly payment for a loan period of three, four, five, and six years at 8 percent APR. Round your answers to the nearest cent. Round Monthly Installment Payment for a Loan in intermediate calculations to the nearest cent. Table 7-2APR+125 $85.6167891011121314151661817181920Monthly Installment Payments for a Loan(Principal and Interest Required to Repay $1,000*)Number of Monthly Payments2436486072$43.87$29.97 $23.03 $18.87$16.1086.07 44.3230.4223.4919.3316.5786.5344.7730.8823.9519.8017.0586.9945.2331.34 24.4120.28 17.5387.4545.6831.8024.8820.76 18.0387.9246.14 32.2718.5388.3846.6132.7419.0388.85 47.0733.2119.5589.3289.7990.2690.7391.2091.6892.1692.6347.5433.6948.0134.1848.49 34.6748.9635.1649.4435.6549.9236.1550.4136.6650.90 37.1625.36 21.2525.8521.7426.3322.2426.8322.7520.0727.3323.2720.6127.83 23.7921.1428.3424.3221.6928.8524.8522.2529.37 25.39 22.8129.9025.9423.3830.4326.49 23.9584$14.1314.6115.0915.5916.0916.6017.1217.6518.1918.7419.2719.8620.4421.0221.6122.21"To illustrate, assume an automobile loan of $14,000 at 8 percent for five years. To repay $1,000, the monthly paymentis $20.28; therefore, multiply $20.28 (8% row and 60-month column) by 14 to give a monthly payment of $283.92. Foramounts other than exact $1,000 increments, simply use decimals. For example, for a loan of $14,500, the multiplier wouldbe 14.5.*For fractional interest rates of 5.5, 6.5, 7.5, and so on, simply take a monthly payment halfway between the whole-number APR payments. For example, the payment for 48 months at 9.5 percent is $25.12 ($25.36 $24.88 = $0.48;$0.48/2 = $0.24; $0.24 + $24.88 $25.12).

A loan is a contract where a sum of money is forwarded in exchange for a promise of future repayment…

Answered: They are considering trading their car…

Corporate Financial Accounting

14th Edition

ISBN:9781305653535

Author:Carl Warren, James M. Reeve, Jonathan Duchac

Publisher:Carl Warren, James M. Reeve, Jonathan Duchac

Chapter10: Liabilities: Current, Installment Notes, And Contingencies

Section: Chapter Questions

Problem 10.5EX: Entries for discounted note payable A business issued a 60-day note for 75,000 to a creditor on...

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They are considering trading their car in for a newer used vehicle so that Harry can have dependable transportation for commuting to work. The couple still owes $4,770 to the credit union for their current car, or $265 per month for the remaining 18 months of the 48-month loan. The trade-in value of this car plus $1,000 that Harry earned from a freelance interior design job should allow the couple to pay off the auto loan and leave $1,400 for a down payment on the newer car. The Johnsons have agreed on a sales price for the newer car of $23,000. The money planned for tires will be spent for other incidental taxes and fees associated with the purchase.

1. Using the Garman/Forgue companion website or the information in Table 7-2, calculate the monthly payment for a loan period of three, four, five, and six years at 8 percent APR. Round your answers to the nearest cent. Round Monthly Installment Payment for a Loan in intermediate calculations to the nearest cent.

Table 7-2
APR+
12
5 $85.61
6
7
8
9
10
11
12
13
14
15
16
618
17
18
19
20
Monthly Installment Payments for a Loan
(Principal and Interest Required to Repay $1,000*)
Number of Monthly Payments
24
36
48
60
72
$43.87
$29.97 $23.03 $18.87
$16.10
86.07 44.32
30.42
23.49
19.33
16.57
86.53
44.77
30.88
23.95
19.80
17.05
86.99
45.23
31.34 24.41
20.28 17.53
87.45
45.68
31.80
24.88
20.76 18.03
87.92
46.14 32.27
18.53
88.38
46.61
32.74
19.03
88.85 47.07
33.21
19.55
89.32
89.79
90.26
90.73
91.20
91.68
92.16
92.63
47.54
33.69
48.01
34.18
48.49 34.67
48.96
35.16
49.44
35.65
49.92
36.15
50.41
36.66
50.90 37.16
25.36 21.25
25.85
21.74
26.33
22.24
26.83
22.75
20.07
27.33
23.27
20.61
27.83 23.79
21.14
28.34
24.32
21.69
28.85
24.85
22.25
29.37 25.39 22.81
29.90
25.94
23.38
30.43
26.49 23.95
84
$14.13
14.61
15.09
15.59
16.09
16.60
17.12
17.65
18.19
18.74
19.27
19.86
20.44
21.02
21.61
22.21
"To illustrate, assume an automobile loan of $14,000 at 8 percent for five years. To repay $1,000, the monthly payment
is $20.28; therefore, multiply $20.28 (8% row and 60-month column) by 14 to give a monthly payment of $283.92. For
amounts other than exact $1,000 increments, simply use decimals. For example, for a loan of $14,500, the multiplier would
be 14.5.
*For fractional interest rates of 5.5, 6.5, 7.5, and so on, simply take a monthly payment halfway between the whole-
number APR payments. For example, the payment for 48 months at 9.5 percent is $25.12 ($25.36 $24.88 = $0.48;
$0.48/2 = $0.24; $0.24 + $24.88 $25.12).

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