FINANCE PROJECT

MAT 119, Fall 2011, Dr. Carol JVF Burns

• You may work in groups of no more than three people for this project: a single portfolio may be turned in, if desired, for the entire group, in which case the same grade will be given to all people in the group.
• This project is due on Friday, October 21, and is worth 30 points.
  This project cannot count as a ‘small assessment’ i.e., it cannot be dropped.
• No late projects will be accepted. If you are unable to turn it in on the due date, then you must make arrangements to turn it in early.

GENERAL INSTRUCTIONS:

• Go to a car dealership and determine the make, model, year, and price (including tax and license fees) of the car you wish to purchase:

  CAR MAKE:
  CAR MODEL:
  CAR YEAR:
  PRICE:
  TAX:
  FEES (list each fee separately): www.edmunds.com has a nice summary of fees associated with the purchase of a car

• Determine the trade-in value that the car dealership is willing to give you (if applicable).
  Kelley Blue Book is a good resource to determine a trade-in value.
  

  TRADE-IN VALUE:

• Determine the amount of cash that you can pay as a down payment:
  

  DOWN PAYMENT:

• What amount will you need to borrow?
  

  LOAN AMOUNT:

• Ask the car dealership, or go to a bank and determine the interest rate and length of time, for a car loan for your loan amount that they will be willing to give to YOU.
  

  NAME OF LOAN AGENT:
  INTEREST RATE:
  LENGTH OF LOAN:

• What will your monthly payments be?
  Clearly show the mathematics being used to determine these monthly payments.
  What (if any) assumptions are you using to determine these payments?

  MONTHLY PAYMENTS:
  MATH USED TO DETERMINE PAYMENT:
  ASSUMPTION(S):

• Construct an amortization table for your car loan, using the format shown below.
  You may use a spreadsheet (such as Excel), if desired, to prepare your amortization table.
  The arithmetic needed in this amortization table is illustrated on index card 25b.
  You should attach the amortization table as a separate sheet of paper.

  END OF PERIOD	INTEREST CHARGED	REPAYMENT MADE	PAYMENT TOWARDS PRINCIPAL	OUTSTANDING BALANCE

• Determine the total interest paid over the course of the loan.
  

  TOTAL INTEREST:

• Make a graph of the loan balance as a function of payment number.
  That is, the $x$-axis will be the payment number (1, 2, 3,...) and the $y$-axis will be the outstanding balance of the loan.
  You should attach this graph as a separate sheet of paper.
• Determine how long it would take to pay off your loan if you paid \$75 more each month.
  Clearly show the mathematics used to determine your answer.

  LENGTH OF LOAN IF YOU PAY \$75 MORE EACH MONTH:
  MATH USED TO DETERMINE ANSWER:

• Determine the total amount of interest paid if you paid \$75 more each month.
  Clearly show the mathematics used to determine your answer.

  TOTAL INTEREST WITH SHORTER LOAN:
  MATH USED TO DETERMINE ANSWER:

• Discuss the advantages and disadvantages of paying off a loan with higher payments than required.