Chapter 6.5, Problem 29E

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12th Edition

Ronald J. Harshbarger + 1 other

ISBN: 9781337625340

Textbook Problem

A recent college graduate buys a new car by borrowing $18,000 at 8.4% compounded monthly for 5 years. She decides to pay $384 instead of the monthly payment required by the loan.

(a) What is the monthly payment required by the loan, and how much extra did she pay per month?

(b) How many $384 payments will she make to pay off the loan?

(c) How much will she save by paying $384 per month rather than the required payment?

**(a)**

To determine

**To calculate:** The monthly payment on the loan and the extra amount paid per month if the amount $18,000 is borrowed by a college graduate at

Explanation

**Given Information:**

The amount $18,000 is borrowed by a college graduate at

**Formula used:**

If a debt of *i* per period, is amortized by *n* equal periodic payments, the size of each payment is:

**Calculations:**

Consider the provided information:

The amount $18,000 is borrowed by a college graduate at

Since, according to the given information,

The amount $18,000 is borrowed by a college graduate.

Therefore,

They refinance at

Therefore,

And,

The size of each payment is:

Substitute *i* and *n* in

**(b)**

To determine

**To calculate:** The number of payments of $384 she would make to pay off the loan if the amount $18,000 is borrowed by a college graduate at

**(c)**

To determine

**To calculate:** The amount saved by her by paying $384 per month instead of the required payment if the amount $18,000 is borrowed by a college graduate at

Sect-6.1 P-1CPSect-6.1 P-2CPSect-6.1 P-3CPSect-6.1 P-4CPSect-6.1 P-5CPSect-6.1 P-1ESect-6.1 P-2ESect-6.1 P-3ESect-6.1 P-4ESect-6.1 P-5E

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