To purchase a car, Sarah took out a 60-month loan for $32,800 with a 6% annual interest rate. After making 40 payments, Sarah received a bonus from work and plans to use it to pay off the remaining balance. Calculate Sarah's monthly payment and the amount needed to pay off her loan.

To purchase a car, Sarah took out a 60-month loan for $32,800 with a 6% annual interest rate. After making 40 payments, Sarah received a bonus from work and plans to use it to pay off the remaining balance. Calculate Sarah's monthly payment and the amount needed to pay off her loan.

EBK CFIN

6th Edition

ISBN:9781337671743

Author:BESLEY

Publisher:BESLEY

Chapter4: Time Value Of Money

Section: Chapter Questions

Problem 25PROB

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Concept explainers

Cost of Credit

The cost of credit is an extra amount that the borrower has to pay besides the loan amount. These credit charges may vary from loan to loan. The cost of credit includes interest charges, maintenance charges, and arrangement charges. Some of the costs are mandatorily collected by the lender based on the loan amount and tenure of the loan. The cost of credit is also called finance charges of the credit.

Question

To purchase a car, Sarah took out a 60-month loan for

$32,800

with a

annual interest rate. After making

payments, Sarah received a bonus from work and plans to use it to pay off the remaining balance. Calculate Sarah's monthly payment and the amount needed to pay off her loan.

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