Guy dePrimo buys a new car for $9,837.91. He puts 10% down and obtains a simple interest amortized loan for the rest at 8 7/8% interest for four years. (Round all answers to the nearest cent.)

Question

a) Find his monthly payment.

(b) Find the total interest.

$  

(c) Prepare an amortization schedule for the first two months of the loan.



Answer 1

First off we need to find the loan amount: 9837.91 * 90% = 8854.12

Now we find the yearly interest on the loan: 8854.12 * 8 7/8% = 785.80

Combine the 2 values: 8854.12 + 785.80 = 9639.92

A) Divide it by 12 for monthly payments: 9639.92 / 12 = $820

B) take the yearly interest and multiply by 4 years: 785.80 * 4 = $3143.2

C) take the loan amount and multiply it by 47/48 for month 1 and 46/48 for month 2 to find out how much principal was paid off