Question

3) Suppose you finance a car in the amount of $28,550. The loan is for 7 years with an APR of

8%. What will be the payoff balance of this car loan after 4 years?
The

Answer 1

So the payoff balance of the car loan after 4 years will be approximately $22,169.73.

Explanation:

payoff balance after 4 years can be calculated using the following formula:

Payoff balance = Principal * (1 + APR/n)^(nt) - [(Principal * (1 + APR/n)^(nt) * (APR/n)) / (1 + APR/n - 1)]
Where:
Principal is the loan amount, which is $28,550 in this case.
APR is the annual percentage rate, which is 8% in this case.n is the number of times per year that interest is compounded, which is usually 12 for monthly compounding.t is the number of years for which the loan is taken, which is 4 years in this case.
Plugging in the values, we get:
Payoff balance = $28,550 * (1 + 0.08/12)^(124) - [($28,550 * (1 + 0.08/12)^(124) * (0.08/12)) / (1 + 0.08/12 - 1)]
Payoff balance = $28,550 * 1.006669^48 - [$28,550 * 1.006669^48 * 0.006669] / 0.006669Payoff balance = $22,169.73