For examples 1, you will consider a standard 4-year car loan of $10,000, with 6% APR...

50.1K

Verified Solution

Question

Basic Math

For examples 1, you will consider a standard 4-year car loan of$10,000, with 6% APR compounded monthly. Payments are $234.85 permonth, assuming $0 down payment. All of our expected values arefrom the perspective of the bank offering the loan.
1)Â Â Â Â [Scenarios] Consider people who pay for 2 years, thenstopâ€¦..
a)Â Â Â Â Â Assume that the bank can recover an average of $2000 from therepossession process after 2 years.Â Â How much $ does thebank get back from these people total (in payments and repo $combined)?
b)Â Â Â Â If 10% ofpurchasers default after 2 years, and the rest pay in full, what isthe expected value of the loan for the bank?
c)Â Â Â Â Â If 5%of car buyers make no payments at all, 10% default after 2 years,and the rest pay in full, what is the expected value of the loanfor the bank?

Answer & Explanation Solved by verified expert

4.0 Ratings (413 Votes)

1 a Since 2348524 563640 are repaid to the bank in 24 monthly payments and since the bank can recover an average of 2000 from the repossession process after See Answer

Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:

Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!

Become a Member