You have taken out a 60-month, $27,000 car loan with an APR of 7%, compounded monthly. The monthly payment on the loan is $534.63. Assume that right after you make your 50th payment, the balance of the loan is $5,178.70. How much of your next payment goes toward principal and how much goes toward interest? Compare this with the prinicipal and interest paid in the first month's payment. The amount that goes towards interest is $nothing. (Round to the nearest cent.) The amount that goes towards the principal is $nothing. (Round to the nearest cent.) Compare this with the prinicipal and interest paid in the first month's payment. (Select the best choice below.) A. In the first month, the amount that goes towards principal is $377.13 and toward interest is $157.50. Therefore, you can see that over time, as you pay down the principal of the loan, more of your payment has to go to cover interest and less of your payment can go towards reducing the principal. B. In the first month, the amount that goes towards principal is $377.13 and toward interest is $157.50. Therefore, you can see that over time, as you pay down the principal of the loan, less of your payment has to go to cover interest and more of your payment can go towards reducing the principal. C. In the first month, the amount that goes towards principal is $157.50 and toward interest is $377.13. Therefore, you can see that over time, as you pay down the principal of the loan, more of your payment has to go to cover interest and less of your payment can go towards reducing the principal.

PFIN (with PFIN Online, 1 term (6 months) Printed Access Card) (New, Engaging Titles from 4LTR Press)

6th Edition

ISBN:9781337117005

Author:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk

Publisher:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk

Chapter7: Using Consumer Loans

Section: Chapter Questions

Problem 9FPE

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Question

You have taken out a

60-month,

$27,000

car loan with an APR of

7%,

compounded monthly. The monthly payment on the loan is

$534.63.

Assume that right after you make your

50th

payment, the balance of the loan is

$5,178.70.

How much of your next payment goes toward principal and how much goes toward interest? Compare this with the prinicipal and interest paid in the first month's payment.

The amount that goes towards interest is

$nothing.

(Round to the nearest cent.)

The amount that goes towards the principal is

$nothing.

(Round to the nearest cent.)

Compare this with the prinicipal and interest paid in the first month's payment. (Select the best choice below.)

In the first month, the amount that goes towards principal is

$377.13

and toward interest is

$157.50.

Therefore, you can see that over time, as you pay down the principal of the loan, more of your payment has to go to cover interest and less of your payment can go towards reducing the principal.

In the first month, the amount that goes towards principal is

$377.13

and toward interest is

$157.50.

Therefore, you can see that over time, as you pay down the principal of the loan, less of your payment has to go to cover interest and more of your payment can go towards reducing the principal.

In the first month, the amount that goes towards principal is

$157.50

and toward interest is

$377.13.

Therefore, you can see that over time, as you pay down the principal of the loan, more of your payment has to go to cover interest and less of your payment can go towards reducing the principal.

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