Question 1: Loan Payment If you take $8,000 car loan that calls 48 monthly payments at an APR of 10 percent. What is your monthly payment? What is the effective annual interest rate on the loan?
Question 2: Amortizing Loan. You take out a 30-year $100,000 mortgage loan with an APR of 6 percent and monthly payments. In 12 years you decide to sell your house and pay off the mortgage.
What is the principal balance on the loan?
Question 3: Amortizing Loan Consider a 4-year amortizing loan. You borrow $1,000 initially an repay it in four equal annual year-end payments.
a. If the interest rate is 8 percent show that the annual payment is $301.92
b. Fill in the following table, which shows how much of each payment is interest versus principal repayment (that is amortization), and the outstanding balance on the loan at each date.
Time Loan Balance Year-end Interest Year-end Payment Amortization of Loan
Due on Balance
0 $1,000 $80 $301.92 $221.92
1 _______ _________ $301.92 _____
2 _______ _________ $301.92 _____
3 _______ _________ $301.92 _____
4 0 0 __ ___
c. Show that the loan balance after 1 year is equal to the year-end payment of $301.92 times the 3-year annuity factor.