With auto loans extending 5,6,7 or more years, it is common for buyers who wish to...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
With auto loans extending 5,6,7 or more years, it is common for buyers who wish to trade in their cars after a few years to find themselves to be "upside down" on the loan. In other words, the outstanding principal on the car loan exceeds the value of the car being traded. Suppose you buy a new Toyota for $200,000 and borrow the full amount from the bank. You agree to a repayment schedule of 8 equal annual payments beginning one year from today. The banker's required return is 9%, compounded annually. Assume the car will lose 20% of its value the first year and further lose $2,000 each year thereafter. (1) Prepare an amortization schedule for the loan together with the depreciation schedule of the car up to the year when it is not "upside down". You can round your calculation to the nearest dollar. (10 marks) (2) Assume the information as given, except that you put $30,000 down payment on the car, so that you only borrow $170,000. Now, after which loan payment the car will be worth more than the outstanding balance of the loan. (5 marks) With auto loans extending 5,6,7 or more years, it is common for buyers who wish to trade in their cars after a few years to find themselves to be "upside down" on the loan. In other words, the outstanding principal on the car loan exceeds the value of the car being traded. Suppose you buy a new Toyota for $200,000 and borrow the full amount from the bank. You agree to a repayment schedule of 8 equal annual payments beginning one year from today. The banker's required return is 9%, compounded annually. Assume the car will lose 20% of its value the first year and further lose $2,000 each year thereafter. (1) Prepare an amortization schedule for the loan together with the depreciation schedule of the car up to the year when it is not "upside down". You can round your calculation to the nearest dollar. (10 marks) (2) Assume the information as given, except that you put $30,000 down payment on the car, so that you only borrow $170,000. Now, after which loan payment the car will be worth more than the outstanding balance of the loan. (5 marks)
Expert Answer:
Answer rating: 100% (QA)
To prepare the amortization schedule for the loan and the depreciation schedule of the car we need to calculate the annual payment amount the deprecia... View the full answer
Related Book For
International Marketing And Export Management
ISBN: 9781292016924
8th Edition
Authors: Gerald Albaum , Alexander Josiassen , Edwin Duerr
Posted Date:
Students also viewed these finance questions
-
Managing Scope Changes Case Study Scope changes on a project can occur regardless of how well the project is planned or executed. Scope changes can be the result of something that was omitted during...
-
Required a. Use professional judgment in deciding on the preliminary judgment about materiality for earnings, current assets, current liabilities, and total assets. Your conclusions should be stated...
-
1. [20 points] A mattress manufacturer has three production facilities located in Pittsburg (PA), Houston (TX), and Los Angeles (CA). They supply their products to three distribution centers in...
-
A rescue helicopter is lifting a man (weight = 822 N) from a capsized boat by means of a cable and harness. (a) What is the tension in the cable when the man is given an initial upward acceleration...
-
1. What did Case view as "the only possible consideration" for his agreement to reimburse UPI for some of the cost of his employment-related education? 2. How did the court interpret Case's view of...
-
The ratio of the intake volume to the displacement volume in a single-stage compressor is called (a) Isentropic efficiency (b) Theoretical volumetric efficiency (c) Actual volumetric efficiency (d)...
-
Various types of accounting changes can affect audit reporting. AICPA auditing standards indicate that an emphasis-of-matter explanatory paragraph should be included when accounting principles have...
-
7: A bouncy ball rolls off a 1 meter high desk with an initial horizontal velocity and executes projectile motion. With each bounce, it only gets to 80% of the maximum height of the previous bounce....
-
John Henderson's will provides for the creation of a trust for the benefit of Holly Jones. Under the specific terms, the trust is required to distribute to Holly $50,000 cash and 1,000 shares of IBM...
-
1:List 4 warning signs of risk when managing risk. 2:Insurance can mitigate political risks. what are exemplary hazards ? name the 5.
-
Rewrite the logarithm using the natural base. log5 (26) Use a calculator to evaluate the logarithm. Round to Question Help: Message instructor Submit Question
-
Solve the inequality 7x-6>43 and select the graph of the solutions. What is the solution? {x (Type an inequality.)
-
When kx + (3k+ 1)x + k is divided by (x+2) the remainder is 1. Use the Remainder Theorem to find the possible values of k.
-
Show that argz -arg|z And arg(1/z) = -argz
-
Insert n or U to make the statement true. (8,12,16,20) (1,8,9,12,15) = (8,12)
-
In February 2015, Arctic Cat, Inc., acquired the assets and liabilities of MotorFist, LLC, a privately owned company based in Idaho Falls, Idaho, in exchange for $9.118 million in cash and contingent...
-
What is the shape of the exponential distribution?
-
Who are the key stakeholders for Bayonne Ham, Feta Cheese, and Champagne?
-
Can the European Union become too big? Is there a point of diminishing returns for a regional economic areas? Explain.
-
The Capitool Company, with headquarters and main manufacturing plant in Racine, Wisconsin, in the United States, produces a line of capital equipment for use in a variety of industries, especially...
-
The dissociation of phosphorus pentachloride takes place at \(250^{\circ} \mathrm{C}\) as \[ \mathrm{PCl}_{5} ightleftharpoons \mathrm{PCl}_{3}+\mathrm{Cl}_{2} \quad K_{P}=1.8 \] Calculate the...
-
The reaction for oxidation of sulphur is given by \[ \mathrm{SO}_{2}(\mathrm{~g})+\frac{1}{2} \mathrm{O}_{2}(\mathrm{~g}) ightarrow \mathrm{SO}_{3}(\mathrm{~g}) \] A mixture of sulphur dioxide and...
-
The thermal decomposition of limestone takes place as \[ \mathrm{CaCO}_{3}(\mathrm{~s}) ightleftharpoons \mathrm{CaO}(\mathrm{s})+\mathrm{CO}_{2}(\mathrm{~g}) \] Calculate the decomposition pressure...
Vol 7 Water And Aqueous Solutions At Subzero Temperatures 1st Edition - ISBN: 1475769547 - Free Book
Study smarter with the SolutionInn App