Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Leo has a car loan with 4 years left. The outstanding balance on the loan is $11250 and his monthly payments (at the end of

Leo has a car loan with 4 years left. The outstanding balance on the loan is $11250 and his monthly payments (at the end of each month) are $289.67.

a) What is the nominal annual rate compounded monthly for the loan?  

b) If the nominal annual rate compounded monthly changes to 7.201000000000001% what is the Present Value of his current payments?  

c) If his lender will allow him to renegotiate the terms of the loan to the new lower interest rate, but charges him a (3 month's interest rate) penalty of: 3 * (original monthlyRate) * Outstanding Balance, how much is the penalty?

d) What would his new payments be? (The penalty from part c) is added to the Outstanding Balance.)  

e) (T/F) He should refinance.   TrueFalse

f) If his lender charges him a (Interest Rate Differential) penalty of (originalRate - newRate) * Outstanding Balance * (Number of Payments Remaining), how much is the penalty?  

g) (T/F) He should refinance.


Step by Step Solution

3.37 Rating (153 Votes )

There are 3 Steps involved in it

Step: 1

Part a Nominal annual rate compounded monthly 10799877 as follows Part b If the nominal annual int... blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Personal Finance An Integrated Planning Approach

Authors: Ralph R Frasca

8th edition

136063039, 978-0136063032

More Books

Students also viewed these Accounting questions

Question

How does a cash account differ from a margin account?

Answered: 1 week ago