Question:Answer QUESTION " e" ONLY AND SHOWFULL WORKAND EXPLANATION!!

2. (20 points), loan with annuity.. present value in excel

You're given with a 6-year auto loan from your credit union. Suppose the car costs $56,000 and your down payment is $6,500. The current market interest rate is 3.2% for the short-term loans with the same creditability as yours. Answer the following questions:

a)Given that the APR (namely the Annual Percentage Rate. That is, the stated interest agreed on the loan) of the loan is 3.2% per year, what is the monthly payment if you're intended to have the loan for 6 years?

1)$800.15 2) $1350.063) $756.524) $520.17 5) none of the above.

=PMT(B4/12,B1,B2-B3) Time (N)72 Cost

$56,000.00

Down Payment $6,500.00

Interest Rate 3.20%

Monthly Payment$756.52

The total loan amount = 49500

Interest rate = 3.2 %

Monthly interest = 3.2/ 12 = 0.266667%

n= 6 * 12 months = 70

Loan = Annuity * PVIFA ( r%, n)

49500 = A * PVIFA ( 0.433%,60)

A= $$756.52

b)What is the effective annual rate if the loan is compounded monthly?

1)3.5%2) 3.247%3) 2.85% 4) 3.45% 5) none of the above.

Effective Annual Rate is [1+(0.032/12)]^12

Effective Annual Rate= 3.247%

Formula used in excel=EFFECT(C17,12)

If the loan is compouned monthly, the stated interest is

r =( 1+ r/12)^12 - 1

12

=(1+ 0.032/12)^12 - 1 = 3.247%

d.)Suppose the original agreement that you signed with credit union is to have a 3-year loan and pay back the loan with $24,000 at the end of year 3, how much will be your monthly payment if this how you finance the purchase?

1) $650 2) $520.5 3) $320 4) $754.82 5) none of the above.

e)Suppose that the left-over principal of the loan is $36,000 at the end of the second year after two years of payments given in a), what is the Internal Rate of Return (IRR) for this loan now?Is this rate different from the 3.2% market interest rate? Why or why not?