ep 1: Review the Range Rover
Consider the purchase of the latest model of the Range Rover (Supercharged) at http://www.landrover.com/us/en/lr/all-new-range-rover/
•The purchase price is $90,000.
•The term of the loan is 60 months.
•The interest rate is the current prime plus 5%.
•The loan requires a 20% down payment.
Step 2: Create an Excel spreadsheet with four tabs
Tab One: Original Scenario
Build an amortization table which shows this loan fully amortized according to the terms listed above. A very helpful video resource can be found here:
http://www.youtube.com/watch?v=Z7Tgy49u8SU&list=UUTPOMEWVghQOMKl8W18Jisw&index=8&feature=plcp
Tab Two: Increased Monthly Payments
Show the effect of increased monthly payments. Take the original table in Tab One and increase the monthly payment by 50% in the 25th month and forward.
Tab Three: The Effect of Loan Refinancing
Show the effect of refinancing. Take the original table and decrease the interest rate by 3% in the 25th month forward.
Tab Four: Analysis
Write a brief summary and analysis of the effect of the actions taken in Tabs Two and Three. Which action is more beneficial to the purchaser of this vehicle? That is, which action allows the purchaser to pay off the loan faster: a consistent increase in monthly payments under the original terms of the loan, or refinancing the loan with a lower rate?
You will be graded on the accuracy of the three models and the accompanying analysis. Partial credit is available towards the three models. If the analysis is correct but based on incorrect models, then no credit will be given for the analysis. Each section is worth 25% of the total grade.
