A. Prepare a note amortization schedule for the first year?

Total Price : 33.000 annual rate of interest :

Down Payment : 1.000 Rate of Interest :
Remaining : 32.000

Date Cash Payment ($) Interest Expense ($) (@2%) Change in amount ($)
1/1/2010
4/1/2010 400 640 240
7/1/2010 400 645 245
10/1/2010 400 650 250
1/1/2011 400 655 255

B. At the end of 2011, the customer owes 32,990. in other words, $990 above the beginning value is owed

C. New quarterly payments

Particulars Amount ($)
Carrying Value 32,990
Dividen by : PVOA (8,2%) 7.32548
New quarterly payments 4,503

D.
 Date Cash Paid Interest Expense Change In Carrying Amount
1/1/2020
1/4/2020 4,503 660 - 3,844
1/7/2020 4,503 583 - 3,921
1/10/2020 4,503 505 - 3,999
1/1/2021 4,503 425 - 4,079
1/4/2021 4,503 343 -4161
1/7/2021 4,503 260 -4244
1/10/2021 4,503 175 -4329
1/1/2022 4,503 88 -4415

E. The new sales gimmick may bring people into the showroom the first time but will drive them away once they learn of
Many will not have budgeted for these increases, and will be facing a financial challenge because they owe more on their
 8%
2%

Carrying Value of Note ($)

32,000
32,240
32,485
32,735
32,990

ginning value is owed

 Carrying Amount Of Note
32,990
29,146
25,226
21,227
17,148
12,987
8,744
4,415
- 0

drive them away once they learn of the amount of their year 2 and year 3 payments.
nge because they owe more on their car than its worth. One should question the ethics of a dealer using this tactic.