Ask Question
BusinessBusiness
20 December, 21:33

After visiting several automobile dealerships, Richard selects the car he wants. He likes its $10,500 price, but financing through the dealer is no bargain. He has $2,100 cash for a down payment, so he needs an $8,400 loan. In shopping at several banks for an installment loan, he learns that interest on most automobile loans is quoted at add-on rates. That is, during the life of the loan, interest is paid on the full amount borrowed even though a portion of the principal has been paid back. Richard borrows $8,400 for a period of two years at an add-on interest rate of 10 percent.

a) What is the total interest on Richard's loan?

b) What is the total cost of the car?

c) What is the monthly payment?

d) What is the annual percentage rate (APR) ?

+1
Answers (1)
  1. 20 December, 23:30
    0
    a) Total Interest Paid in 24 months is $1680

    b) Total Cost of the car is $12180

    c) Monthly Payment is $420

    d) Annual Percentage Rate is 10.47%

    Explanation:

    (a) Loan Amount = $8400

    Interest Rate = 10%

    Monthly Interest = 8400 x (10%/12)

    = $70

    Total Interest Paid in 24 months = 24 x 70

    = $1680

    (b) Total Cost of the car = Loan Amount + Interest Paid + Down payment

    = 8400 + 1680 + 2100

    = $12180

    (c) Monthly Principal Payment = 8400/24

    = $350

    Monthly Payment = Monthly Interest Payment + Monthly Principal Payment

    = 70 + 35

    = $420

    (d) Annual Percentage Rate = (1 + 0.10/12) 12 - 1

    = 0.1047

    = 10.47%
Know the Answer?
Not Sure About the Answer?
Get an answer to your question ✅ “After visiting several automobile dealerships, Richard selects the car he wants. He likes its $10,500 price, but financing through the ...” in 📙 Business if there is no answer or all answers are wrong, use a search bar and try to find the answer among similar questions.
Search for Other Answers
You Might be Interested in
The objective of financial reporting is to provide useful financial information to capital providers. The primary decision specific qualities that make financial information useful are relevance and faithful representation.
Answers (1)
When a new firm enters a market, it: A. Pushes the equilibrium price upward. B. Reduces the profits of existing firms. C. Shifts the market supply curve to the left. D. Shifts the market demand curve to the left.
Answers (1)
Miller Light Beer, Maxwell House Coffee, Jell-O brand gelatin, Kraft mayonnaise, and Marlboro Cigarettes, were all at one time products of the Philip Morris Company. These products represented a part of the product line Philip Morris offered. A.
Answers (1)
Business Calculators Inc. will pay an annual dividend of $2.25 per share next year. The company just announced that future dividends will be increasing by 0.75 percent annually.
Answers (1)
Ichor Co. reported equipment with an original cost of $379,000 and $344,000 and accumulated depreciation of $153,000 and $128,000, respectively, in its comparative financial statements for the years ended December 31, 20X5 and 20X4.
Answers (1)
New Questions in Business
How are chain restaurants started
Answers (2)
When observing your customers for signs of intoxication, you don't need to consider how they look or act upon entering your establishment because you are not responsible for what they did before they arrived.
Answers (1)
Is there anything that you find particularly impressive about southwest airlines?
Answers (1)
All of the following are true of the effect of fair value accounting on the financial statements except a. changes in the fair value of trading securities are recognized on the income statement b.
Answers (1)
Are morality & ethics the same thing?
Answers (1)
Home » Business » After visiting several automobile dealerships, Richard selects the car he wants. He likes its $10,500 price, but financing through the dealer is no bargain. He has $2,100 cash for a down payment, so he needs an $8,400 loan.
Sign Up Forgot Password?