Question

You are looking to purchase a Tesla Model X sport utility vehicle. The price of the vehicle is $94,000. You negotiate a six-year loan, with no money down and no monthly payments during the first year. After the first year, you will pay $1,350 per month for the following five years, with a balloon payment at the end to cover the remaining principal on the loan. The APR on the loan with monthly compounding is 3.2 percent. What will be the amount of the balloon payment six years from now

Answer 1

Answer:

Purchase of Tesla Model X Sport Utility Vehicle

The amount of the balloon payment six years from now is:

= $39,322.67.

Explanation:

a) Data and Calculations:

Cost of vehicle = $94,000

Period of loan = 6 years

Terms: No down payment and no monthly payments during the first year.

Monthly payment after the first year = $1,350

Total payments to be made = $104,122.67

The total payments including interest from an online financial calculator:

Payoff: 6 years 5.13 months

You will need to pay $1,350.00 every month for 6 years 5.13 months to payoff the debt.

Monthly Payment $1,350.00

Time Required to Clear Debt 6.43 years

Total of 77.13 Payments $104,122.67

Total Interest $10,122.67

Total monthly payments from second year to fifth year = $64,800 ($1,350 * 48)

Expected balloon payment to cover the remaining principal = $39,322.67 ($1014,122.67 - $64,800)