On June 1, 2014, you bought a new sports car for $ 60,000. You made a $ 10,000 cash down payment and signed a $ 50,000 note, payable in four equal installments on each June 1, with the first payment to be made on June 1, 2015. The interest rate is 6 percent per year on the unpaid balance. Each payment will include payment on principal plus interest.
1. Compute the amount of the equal payments that you must make.
2. What is the total amount of interest that you will pay during the four years?
3. Complete the following schedule:
4. Explain why the amount of interest expense decreases each year.
5. To reduce the total amount of interest paid on this note, you considered the possibility of making equal payments every three months (four payments per year). Compute the amount of the equal payments that you must make and the amount of interest that will be saved over the life of the note.