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Sofia wants to buy a new car and is offered a very low monthly repayment by the bank. She discovers the reason for this is that they have included a residual/balloon payment of 35%.

Answer the questions that follow.

1)  What is a residual or balloon payment?

2)  Calculate the residual amount if Sofia’s car costs R 227 500.

3)  Calculate the monthly repayments that Sofia will have to make on her new car.
4)  If Sofia’s car depreciates at a rate of 21% per year, calculate the value of her car after 60 months.

5)  Will Sofia be able to completely pay off her balloon payment by trading in her car?
in Mathematics by Diamond (40,336 points) | 36 views

1 Answer

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1. A residual is a repayment that is made at the end of a loan period in a lump sum

2.  227 500 ×35%=R79 625 residual amount

3.  227 500− 79 625= 147 875  
                   
$FV =147 875 (1+0.08)^5$        
= 217 276.89
  217 276.89/60 months= R3 621.28 payment per month
4. Y1:  227 500−21%=  179 725     Y2:  179 725−21%= 141 982.75
Y3: 141 982.75−21%= 112 166.37     Y4: 112 166.37−21%= 88 611.43
Y5: 88 611.43−21%=R 70 003.03 is the value of the car after 60 months

5. Residual . Value  of the car
No. Sofia will not be able to pay off the residual completely by trading in her car.
by Wooden (4,484 points)

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