You have decided to purchase a car. You have found aclean used car that will cos

Question

You have decided to purchase a car. You have found aclean used car that will cost you 8,500. You can finance yourpurchase through the dealer at an annual rate of 12% for 24months. The dealer requires a down payment of2,000. A. What will be the amount of your monthlypayments? B. How much will you pay the dealer over the life of theloan? C. How much of this amount will be interest? D. If you decide to pay off the loan at the end of thefirst year, how much will you owe the dealer? You have decided to purchase a car. You have found aclean used car that will cost you 8,500. You can finance yourpurchase through the dealer at an annual rate of 12% for 24months. The dealer requires a down payment of2,000. A. What will be the amount of your monthlypayments? B. How much will you pay the dealer over the life of theloan? C. How much of this amount will be interest? D. If you decide to pay off the loan at the end of thefirst year, how much will you owe the dealer?

Explanation / Answer

(a) [0.01*6500]/{1-(1+0.01)^(-24))} = 305.98 (b) 305.98 x 24 =7343.52 (c)7343.52 -6500 =843.52 (d) 305.98 x [(1-1/(1+0.01)^12)/0.01] =3443.83

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