Question

Mary Smith took a car loan of $29,000 to pay back in 36 monthly installments at an interest rate of 2%. Compute the loan balance immediately after the 24th payment. 1)$9,968 2)$10,232 3)$14,500 4)$9,860

Answer 1

To compute the loan balance immediately after the 24th payment, use the loan balance formula. With a monthly payment of approximately $832.37, the loan balance is approximately $9,968.

Step-by-step explanation:

To compute the loan balance immediately after the 24th payment, we need to determine the remaining principal balance. The loan balance after each monthly payment can be calculated using the formula:

Loan Balance = Principal - (Monthly Payment - Interest)

For this loan, the principal is $29,000, the monthly payment is calculated using the formula for a loan with equal monthly installments:

Monthly Payment = Principal * (Interest Rate/12) / (1 - (1 + Interest Rate/12)^(-Number of Payments))

With an interest rate of 2% and 36 monthly payments, the monthly payment is approximately $832.37. Plugging the values into the loan balance formula, the loan balance immediately after the 24th payment is approximately $9,968.