Could anyone help me with Q5 A and B. Thanks
Ok, so for part A its asking for total cost of the yacht. We can work this out by using the table provided. We should first work out how much just directly we are borrowing to purchase this yacht. The table states its $47 500, which we will then use to subtract the deposit and the trade in allowance to work out the amount borrowed.
As an aside, the question is a little bit ambiguous if the trade in subsidises the actual amount you borrow, so this answer may be wrong, but it makes the most logical sense.
This amount is the principal in the I=PRN formula. We know to use the I=PRN formula as the table states it is a flat interest rate and it is at 15.8% p.a over five years. We then put this into the formula to work out the total interest we have to pay: I= 35 600 x 15.8% x 5. This gives a interest value of $28124, which we then add back to the principal ($35 600) which gives us a total cost of $63724 for the yacht directly. Their is also other charges' such as stamp duty ($475) and registration ($1203) we must also add, as well as adding back on the deposit ($6500).
This gives us a final answer of $71902 for part A.
For part b, its asking for the monthly repayments, excluding the other charges, and also excluding the deposit as it is an upfront payment and its not monthly. We already worked out from part A that the total cost of of yacht (principal + interest) is $63724. This is the amount they pay over five years so if we divide this by the amount of months in five years (60 months) we will get the following working out: $63724 / 60 = 1062.07
The answer for part B therefore is $1062.07 per month.
Also, feel free to directly PM me however many more questions you have as I'm happy to help whenever.
