Chapter 7

Financial Planning Exercise 4

Calculating single payment loan amount due at maturity

Chase Boyd plans to borrow $14,000 for 5 years. The loan will berepaid with a single payment after five years, and the interest on the loan will be computed using the simple interest method at an annual rate of 8 percent.

How much will Chase have to pay in five years?

$

How much will he have to pay at maturity if he's required to makeannual interest paymentsat the end of each year?

$

Calculating monthly installment loan payments

Using the simple interest method, find the monthly payments on a $5,000 installment loan if the funds are borrowed for 24 months at an annual interest rate of 6%. You can use financial calculator, Excel, orExhibit 7.6). Round the answer to the nearest cent. Round the answer to the nearest cent.

$per month

How much interest will be paid during the first year of this loan? (Use a monthly payment analysis similar to the one inExhibit 7.7.) Round your intermediate computations and final answers to the nearest cent.

$

Calculating payments, interest, and APR on auto loan

After careful comparison shopping, Noah Griffin decides to buy a new Toyota Camry. With some options added, the car has a price of $29,638 - including plates and taxes. Because he can't afford to pay cash for the car, he will use some savings and his old car as a trade-in to put down $10,138. Noah plans to finance the rest with a $19,500, 60-month loan at a simple interest rate of 6 percent.

1. What will his monthly payments be? Round the answer to the nearest cent.
2. $per month
3. How much total interest will Noah pay in the first year of the loan? Round the answer to the nearest cent. (Use a monthly payment analysis procedure similar to the one inExhibit 7.7.)
4. $
5. How much interest will Noah pay over the full (60-month) life of the loan? Round the answer to the nearest cent.
6. $
7. What is the APR on this loan? Round the answer to 2 decimal places.
8. %