SOLUTION: an individual plans to borrow rs 400000 to buy a new car .the loan will be for 3 years at 12 percent annula rate compounded monthly.he can pay rs 12500 per month during the first y

Question 1064391: an individual plans to borrow rs 400000 to buy a new car .the loan will be for 3 years at 12 percent annula rate compounded monthly.he can pay rs 12500 per month during the first year.what amount would he be requiref to pay during next two yeard in order to repay loan?
Answer by Theo(13342) (Show Source): You can put this solution on YOUR website!
cost is 400,000
payment is 12500 per month
annual interest rate is 12%
monthly interest rate is 12%/12 = 1%.

you can do this by formula, but it's much easier to use a financial calculator.

one such calculator can be found at http://arachnoid.com/finance/

first you want to find the future value of 12 payments of 12500 each at 1% interest per payment period when the present value of the loan is 400,000.

i used the calculator to find the future value is 292,198.72

that became the present value of the next calculation which was to find the payment necessary to completely pay that off in 24 months at the same interest rate.

the calculator told me those monthly payments were each 13,754.81

i then went to microsoft excel and did the calculations manually year by year to confirm that the solution is valid.

excel confirmed that my assumptions of how to use the financial formulas is correct in solving this problem.

these are the inputs and outputs of the online financial calculator i used.

the first one figures out the future value that is used as the present value in the second one.

$$$

the first use of the calculator told me that the remaining balance after 12 month was 292,198.72.

the second use of the calculator told me that the amount of money required each month to pay off 292,198.72 in the remaining 24 months was 13.854.81.

this could have been done manually using formulas, but using the calculators was much easier, even though it was still a little tricky.

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