Question

A truck costing $111,000 is paid off in monthly installments over four years with 8.10% APR. After three years the owner wishes to sell the truck. What is the closest amount from the following list that he needs to pay on his loan before he can sell the truck?

A) $24,956

B) $37,434

C) $31,195

D) $43,673

Answer 1

To solve this problem, we need to calculate the remaining balance on the truck loan after three years, and then round up to the nearest option given in the question.

Using a financial calculator or Excel, the remaining balance on the truck loan after three years can be calculated as:

PV = 111,000, i = 8.10%/12, n = (4-3)x12 = 12

PMT = -2,688.77

Solving for FV, we get:

FV = $70,898.95

Therefore, the remaining balance on the truck loan after three years is approximately $70,898.95.

Next, we have to round up this amount to the nearest option given in the question. The closest option is option D, $43,673.

Therefore, the owner of the truck needs to pay at least $43,673 on his loan before he can sell the truck.