Automobiles are typically financed for four years with monthly payments made to the lending agency. Assume you will need to borrow $18 000 with 48 monthly payments at 6.5% annual interest.
a) If you decide to pay the loan off at the end of 10 months, what amount needed? At the end of 20 months? at the end of 40 months?
b) What is the cumulative interest paid in the first 12 payments? Second 12 payments? Third 12? Last 12?
c) Repeat parts (a), (b), and (c) assuming the rate in 8.5% instead of 6.5%. The amount borrowed remains the same.
e) Repeat (a), (b), and (c) assuming you find it necessary to borrow $20 000. Interest is still 6.5%.
f) What is the result if you borrow $20 000 and interest rate of 8.5%