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DREAM CAR

DREAM CAR. Amortization Schedules Retail Price: $79,665.00 Tax : 6.25% (0.065) Initial amount (Borrowed): $10,000 Annual Payments: 12 Total Payments: 60 Annual interest rate: 14.24%(0.1424). TOTAL PRICE. Tax = 79,665.00(.0625) = $4979.0625 Cost (Retail + Tax)

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DREAM CAR

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  1. DREAM CAR

  2. Amortization SchedulesRetail Price: $79,665.00 Tax : 6.25% (0.065) Initial amount (Borrowed): $10,000Annual Payments: 12 Total Payments: 60Annual interest rate: 14.24%(0.1424)

  3. TOTAL PRICE Tax = 79,665.00(.0625) = $4979.0625 Cost (Retail + Tax) = 79,665.00 + 4979.0625 = $84644.0625 Cost – Down Payment =Loan Amount =84644.0625 – 10000 = $74,644.0625

  4. MONTHLY INTEREST Monthly Interest = Annual Interest =14.24 ≈0.0119 12 12 (P.= $74664.06 m.i. = 0.0119 # months = 12 # years = 5 ) 74664.06 (0.0119) Monthly Payment = ≈ $1748.16 1- (1+(0.0119 ))-12x5

  5. Payments #1 & #2 Payment #1 Interest On Unpaid Balance = 74664.0625 x 0.0119 = $888.50 Amount Paid Toward Principle = 1748.61 - 888.50 = $859.66 New Balance = 74664.06 – 859.66 = $73804.41 Payment #2 Interest On Unpaid Balance = $73804.41 x 0.0119 = $878.27 Amount Paid Toward Principle = 1748.61 – 878.27 = $869.89 New Balance = 73804.41 – 869.89 = $72934.52

  6. Amortization Table (12 Months)

  7. How much did we pay for Interest? Total Cost = Monthly Payment x 60 = 1748.16 x 60 =$104889.60 Total Cost – Initial Loan Amount = 104889.60 – 74664.06 = $30,225.54 (Amount Paid Interest)

  8. 5.5% amortized over 4 years

  9. 6.0% amortized over 6 years

  10. Can we afford this much? 5.5% amortized over 4 years Monthly payment = $1,737.10 Total Cost = $83,380.97 Total Interest Paid= $8,716.91 6.0% amortized over 6 years Monthly payment = $1,237.40 Total Cost = $89,092.74 Total Interest Paid=14,428.68

  11. Which Scenario? • 14.24% amortized over 5 years • 5.5% amortized over 4 years • 6.0% amortized over 6 years

  12. 5.5% amortized over 4 years Monthly payment = $1,737.10 Total Cost = $83,380.97 Total Interest Paid= $8,716.91 6.0% amortized over 6 years Monthly payment = $1,237.40 Total Cost = $89,092.74 Total Interest Paid=$14,428.68 14.24% amortized over 5 years Monthly payment = $1,748.16 Total Cost = $104,889.57 Total Interest Paid = $30,225.51

  13. 5.5% amortized over 4 years! This is better than the others because the amount should be paid per month is $1737.10 and total cost will be $29,562.15. It’s the best price compared to other scnerios.

  14. !BONUS QUESTION! Cost: $33,265.0 # of Months Paid so far : 39 # of Months should be paid : 60 Annual interest rate: 6.5%(0.065) Monthly Interest : 0.0054 Monthly payment : $400

  15. Total Payments made so far = 400 x 39 = $15,600 Payments Left = 33265.00-15600 = $17,665.00 Monthly Payment = 17665 (0.0054) ≈ $ 345.47 1-(1+0.0054 )^(-12x5)

  16. 6.5% amortized over 5 years

  17. How Much? Total Cost = 345.47 x 60 = $20,728.20 How much will be paid for this car? Total Payment + Payments made so far = 20728.20 + 15600.00 = $36,328.20

  18. THANK YOU

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